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Rocco Femia and Lisandra Ortiz Discuss Implications of Tax Court's Medtronic Opinion in Law360 Tax Authority

"Tax Court's Medtronic Method Likely To Invite Another Appeal"

Law360 Tax Authority

Rocco Femia and Lisandra Ortiz discussed the implications of the opinion issued in August 2022 by the U.S. Tax Court in the $1.36 billion transfer pricing dispute between Medtronic and the Internal Revenue Service (IRS) over the arm's length royalty owed under intercompany licenses and the possibility of appeal in Law360 Tax Authority. "In some ways, it's too early to draw implications," Femia said. If there's a takeaway at this point in the case, it's to be responsive to the comments a judge makes during trial. The court "signaled that it was skeptical of the positions put forward by the IRS and [Medtronic], and the taxpayer reacted to that," Femia said. The IRS, he noted, offered no alternative to its method. "When you have a dispute before a neutral decision maker like IRS appeals or a judge, it's important to listen to how that decision maker is reacting to the positions being put forward and to be flexible," Femia said. Ortiz noted the IRS' proposed Comparable Profits Method, which was rejected a second time by the U.S. Tax Court, is one more example of the government attempting to "establish principles of law that can be applied to similar cases." However, she said, "those efforts have yet to bear fruit."