No, I’m not playing war correspondent. Neither is Judge Goeke, although he is allowing an advance by Bloomberg L.P, Bloomberg, Inc., Tax Matters Partner, et al., Docket No. 3755-17, filed 10/13/22.

The Bloombergs and their bunch als (hi, Judge Holmes) want to put in evidence an Advance Pricing Agreement (APA) they made with IRS concerning gross income from UK branches. An APA is sort of a safe harbor deal for certain entities in certain years to avoid a Section 482 income-deduction reallocation jumpball.

IRS moves in limine to preclude same, claiming Sections 10.03 and 10.04 of Rev. Proc. 2006-9, 2006 1 C.B. 278 bar use of the APA by anyone but the named taxpayer, and introduction thereof in any judicial or administrative proceeding for any year outside those covered by the APA.

But the Bloombergs say they are putting in the APA “… to use a transfer pricing method derived from the APA to establish the reasonableness of the allocation of gross receipts between domestic production gross receipts (DPGR) and non-DPGR for purposes of I.R.C. § 199 if the Court holds that part of gross receipts qualifies as DPGR. It asserts that it does not intend to use the APA with respect to the qualification issue.” Order, at p. 1.

Now the APA never discussed Section 199, and neither tax treaty nor sourcing of income issues are involved here.

What wins it for the Bloombergs is Reg. Section 1.199-1(d)(2).

“Treas. Reg. § 1.199-1(d)(2) identifies factors relevant to evaluating the reasonableness of the method allocating gross receipts between DPGR and non-DPGR. These factors include whether the allocation method was used for other Federal or state tax purposes or internal management purposes. Accordingly, an allocation method used for transfer pricing issues is relevant under the regulations. Thus, the APA is relevant. Further, we hold that the APA’s admission is not barred by any part of the revenue procedures cited by respondent.” Order, at p. 1.

So the Bloombergs can produce the APA to advance their case.

A Taishoff “Good Job” goes to Adam R. (“No Phone”) Gahtan, Esq., and his team at Fenwick.