Just as I was about to lament the dearth of Tax Court opinions this week, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan unloads a seventy-five (count ’em, seventy-five) page dissertation to 8 Cir, wherein she has created a new unspecified reallocation of income and expenses method (ostensibly a tweak on CUT vs CPM, but we know better) for unscrambling the doings of Medtronic, Inc. and Consolidated Subsidiaries, T. C. Memo. 2022-84, filed 8/18/22. True, it’s fewer pages than the 144-page avalanche from 2016; see my blogpost “This Is A Memo?” 6/10/16.

But 8 Cir confessed themselves short-stacked therewith, so bucked the Medtronics and their Puerto Rican and Swiss buddies back for a retrial on the numbers; see my blogpost “CUT-UNCUT,” 8/17/18. And Ch J TBS, almost as obliging as Judge David Gustafson, lets ’em have it.

The Siemens/Pacesetter deal really isn’t a CUT. Neither does CPM work, as there really isn’t any comparable profiteer. The Medtronics make only human implantables, and if those go bad the plaintiffs’ PI Bar is quids in, as my UK clients used to say.

So, at close of play, Ch J TBS sums up. “Respondent contends that petitioner’s proposed unspecified method ‘bridges no gaps’ between respondent’s CPM and petitioner’s CUT method. Petitioner provides a method which enables the Court to move in the right direction. Respondent provides no suggestion for realistically bridging the gap. Even though we are rejecting petitioner’s unspecified method as proposed, we will rely upon petitioner’s methodology as setting forth a framework for determining the royalty rate for devices and leads.

“As we have discussed, petitioner’s proposed unspecified method is not perfect. Adjustments need to be made to account for the inadequacy of the CUT method. The major concerns with the CUT method are that there (1) is only one comparable, (2) are too many adjustments, and (3) are inadequate adjustments for profit potential.  Petitioner makes an attempt to address these concerns, but its proposed unspecified method falls short, and the results do not bridge the gap adequately.” T. C. Memo. 2022-84, at p. 60.

Whereupon Ch J TBS massages the numbers, sets them down in tabular form, and leaves it all for the transfer pricing Section 482 crowd to mull over. And maybe use.

I’m betting 8 Cir will be down with the whole deal.