The Application of Section 482 Transfer Pricing Principles to Financial Transactions, Including Guarantees and Credit Support Arrangements
- Steven L. Walker PLC
- Oct 6, 2013
- 1 min read
This proposal was prepared by Steven L. Walker, Chair of the Corporate and Passthrough
Entities Committee of the State Bar of California's Taxation Section.1 The
author wishes to thank William H. Quealy, Jr., Director, Tax Controversy Services,
KPMG LLP, for his valuable insight, support and comments.
This paper was presented to government officials and policy makers as part of the California Lawyer's Association (formerly California State Bar)'s Taxation Section annual delegation to Washington D.C.
The issue is the proper tax treatment of a financial guarantee from a parent company to a wholly-owned subsidiary for Federal income tax purposes. The Service issued Treas. Reg. § 1.482-9 to provide guidance with respect to controlled services transactions, but the regulations carve-out financial guarantees from the regulations’ applicability. This raises the question as to how to treat guarantees under Section 482. Because financial guarantees are relatively common transactions, taxpayers need specific guidance as to the proper tax treatment of guarantees for tax planning and compliance.
