In Uncategorized on 11/18/2020 at 21:43

With The Glasshouse to submerge Friday under the floodwaters of Dawson’s Creek, Judge Albert G (“Scholar Al”) Lauber unloads a 244 (count ’em, 244, and I did) page spectacular full-dress T. C., The Coca-Cola Company & Subsidiaries, 155 T. C. 10, filed 11/18/20.

It’s the ultimate transfer pricing, Section 482 case, and Judge Scholar Al is the man to do it, tracing the history of Section 482 from Section 240(f) of the Revenue Act of 1926, and recounting in extraordinary detail Coke’s operations around the world, with twelve attorneys for Coke and seven for IRS.

In short, Judge Scholar Al finds the Secret Formula, the trademarks, trade dress, processes and procedures that Mama Coke grapples to her soul with hoops of steel means her offshore mixers of concentrate, which they sell off to bottlers, have nothing worth anything, so whatever they get belongs to Mama Coke. The independent bottlers have economic clout; the offshore mixers, known to the cognoscenti as supply points, are mere dust beneath Mama Coke’s shoes.

IRS’ lead expert does a great job, while Judge Scholar Al eviscerates Coke’s guys.

The fight is over the 10-50-50, which I’m sure all y’all were just about to mention. If you weren’t, see my blogpost “Things Go Better With Coke,” 12/14/17. Well, that was a settlement agreement, like a contract, and it expired by its own terms before the year at issue. So all bets are off.

Substantial compliance comes to the fore, to rescue Mama Coke from a double hit on the Section 987 dividend repatriation from its Mexican peso-adjustments. Whatever Mama Coke did was enough for Rev. Proc. 99-32, 1999 CB-2 296.

Judge Scholar Al blocks that block. Coke wants to fight over the blocked income regulation, which says foreign currency controls can be disregarded. After all, what would a full-dress T. C. be without one challenge to a reg.?

“As the parties have observed, the validity of section 1.482-1(h)(2), Income Tax Regs., has been challenged by the taxpayer in 3M Co. & Subs. v. Commissioner, T.C. Dkt. No. 5816-13 (filed Mar. 11, 2013). The Court has granted a motion to submit the 3M case for decision without trial under Rule 122, and the case is still pending. We will accordingly reserve ruling on the parties’ arguments concerning the blocked income regulation until an opinion in the 3M case has been issued.” 155 T. C. 10, at p. 185.

Finally, please excuse this late posting. But this opinion has an appendix of fourteen (count ’em, fourteen) pages containing experts’ resumes.

If there’s any more like this, I might be glad when Tax Court shuts down.

  1. […] Lew Taishoff has WOW – PART DEUX […]


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