Ninth Circuit Decision For IRS Affects Shifting Of Income To Tax Havens
In order for the IRS to respect the allocation of income between the Cayman subsidiary and the parent, the cost-sharing arrangement to keep and improve the intangible assets needs to pass regulatory muster. One of the requirements of the regulations is that stock-based compensation be included as one of the costs. The taxpayers argued, well enough to convince the Tax Court and one of the three judges on the panel, that in an arms-length deal parties would never include stock-based compensation. The IRS did not deny that, but argued that the regulations could never replicate comparable transactions among unrelated parties because they don’t happen enough.
You generally don’t have somebody thinking they want to find somebody in a small country to buy the right to their intellectual property which they will then license back for use in the rest of the world. Further there will be a cost revenue split on future developments. You pretty much only do that sort of thing with related parties to save taxes or possibly for asset protection or some other regulatory concern. In an arms-length deal you could not consider stock-based compensation since there is a chance that the other party’s stock could really take off.
Law Professors Argue That Housing Tax Break For Ministers Is Unconstitutional
The housing allowance statute results in substantial entanglement between the government and churches, such as requiring the IRS and courts to determine which beliefs or purported beliefs should count as a religion for tax purposes, what constitutes a church or a minister, and ministerial functions, whether an ordained minister working for a secular nonprofit counts as a minister if she gives one sermon a year, and similar quandaries. The tax professors point out that ministers working not in churches but as teachers, counselors, directors of business services, alumni relations, and even as basketball coaches, now qualify for the exemption. “In sum, Section 107 requires the government to investigate and oversee both churches and ministers, delving into both doctrine and practice,” the brief states.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.