Later-available information may inform arm's-length price

Plain-English summary

IRS Chief Counsel advised that the section 482 regulations do not categorically bar reliable, relevant information from an arm's-length pricing analysis merely because the information existed contemporaneously but became available to the taxpayer or IRS after the transaction. The information still must satisfy all standards applicable to the particular data, method, facts, and timing constraints. The advice also distinguished the data used to calculate an arm's-length price from the documentation standard used to avoid transfer-pricing penalties under section 6662.

Ruling snapshot

• Question: May contemporaneous information that becomes available only after a transaction be used to calculate its arm's-length price under section 482?
• Outcome: Advice: yes, if the information is otherwise relevant and reliable and all applicable timing and regulatory requirements are met.
• Key authorities: IRC §§ 482 and 6662; Treas. Reg. §§ 1.482-1(a)(3), 1.482-1(g)(4), and 1.6662-6(d)(2)(ii)(A)(2).

Full text (IRS public release)

ID: CCA_2019041717114040
UILC: 482.00-00

Number: 201945026
Release Date: 11/8/2019
From:
Sent: Wednesday, April 17, 2019 5:11:40 PM
To:
Cc:
Bcc:
Subject: Chief Counsel Advice

------------------------------ -- You have requested our advice on whether anything in the Treasury Regulations prohibits contemporaneous but later-available information from being used to calculate the arm’s length price of a transaction under section 482. Nothing in the regulations, by itself, prohibits information (that is otherwise reliable and relevant to the transaction) from being considered in calculating the arm’s length price under section 482 solely by virtue of the information becoming available to the taxpayer or the Service after the date of the transaction. The information must meet all other applicable standards of relevance and reliability – which may vary based on the type of information or transfer pricing method used or other facts and circumstances -- and actual timing constraints may apply such as, for example, statutes of limitations and Treasury Regulation section 1.482-1(a)(3) and (g)(4). In this regard, it should be noted that the scope of the data that may be used to calculate an arm’s length price (and attendant adjustment if appropriate) under section 482, and the scope of the data described in Treasury Regulation section 1.6662-6(d)(2)(ii)(A)(2) for documentation purposes to avoid potential transfer pricing penalties, although often overlapping, are two separate standards intended for two separate purposes.

Please let us know if you have any questions or would like to discuss further.

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