The IRS Large Business and International (LB&I) division today publicly released a practice unit—“Taxpayer’s affirmative use of IRC section 482”—that is part of a series of IRS examiner “job aides” and training materials intended to describe for IRS agents leading practices for specific international and transfer pricing issues and transactions.
Text of the practice unit (release date of 12 May 2016) is available on the IRS practice unit webpage.
This practice unit explains that section 482 allows the IRS to make allocations so that taxpayers clearly reflect income attributable to controlled transactions and to prevent the evasion of taxes. In general, section 482 can only be used by the IRS, but taxpayers are allowed to invoke section 482 under certain situations:
The practice unit explains that taxpayers are not allowed to file an untimely or amended return that decreases U.S. taxable income based on allocations with respect to controlled transactions.
The IRS practice units identify areas of strategic importance to the IRS, provide insight as to how IRS examiners will approach various transactions, and generally provide an understanding of the context in which an IRS examiner will approach a particular issue or transaction.
Thus, taxpayers (and their tax advisers) facing an IRS examination or concerned with issue(s) presented by these practice units will want to review the relevant practice units, so as to have a better understanding of the issues that may arise either prior to or during an examination. For instance, the IRS practice units typically provide information that can help taxpayers:
For taxpayers selected for a pending IRS examination, the practice units can provide information that may assist with preparation for the examination. For taxpayers actually under examination, the practice units may provide information that can assist taxpayers respond to IRS requests.