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Conforming Adjustments A working definition: Following a primary allocation under §482, asecondary adjustment made to rationalize the actual transactionsbetween controlled parties. Treas. Reg. §1.482-1(g)(3). Default rule: a discrepancy between actual and arm’s-lengthtransaction results in deemed capital contribution or dividend, as thecase may be Election: taxpayers may elect to establish a payable/receivablepursuant to an applicable revenue procedure, currently Rev. Proc.99-32 The resulting payable/receivable can be satisfied without further U.S.tax consequences12
Rev. Proc. 99-32 Rules Election to recognize a payable/receivable in the amount of thetransfer pricing adjustment Treated as a debt for all U.S. tax purposes Interaction with §965 Bears interest at arm’s-length rate from the time established untilsatisfied Deemed established on the last day of the taxable year for which anallocation is made If satisfied within 90 days, no additional U.S. tax consequences fromthe repatriation of cash May be treated as pre-paid if offset by bona fide debt or dividendspaid Election not available if transfer pricing penalties imposed13
Page 1 and 2: TP Audit Procedures and Adjustments
Page 3 and 4: Burden of Proof - Transfer Pricing
Page 9 and 10: Correlative Adjustments A working d
Page 11: Interaction Between §482 and Forei
Page 15 and 16: Simple Example - Rev. Proc. 99-32 D
Page 17 and 18: Transfer Pricing Information - IRS

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