| Abstract | In consideration of intangible assets' growing importance in deriving the value for many businesses, it is important to account for these assets' potential tax risks in order to measure their true benefits. One area of tax related to intangible assets under the scrutiny of U.S. transfer pricing and international tax rules is the cost sharing agreement. When related subsidiaries of the same international corporation enter into a cost sharing agreement, they pool their resources together to develop intangible assets for common use. During this process, there are often conflicts between multi-national companies (MNCs) and the Internal Revenue Service (IRS) in assigning the correct amount of how much subsidiaries have to pay one another. Both parties care about this because assigning costs of asset development incorrectly can lead to base erosion and profit shifting behavior for MNCs, affecting both the amount of tax revenue collected by the IRS the and bottom line of MNCs. This thesis examines the causes of this conflict by analyzing court cases between the IRS and different MNCs and synthesizing common conflict points. My results show that potential conflicts between the IRS and MNCs can stem from either the matter of the law or the financial inputs used in modelling the assets' future costs and benefits. While the IRS has imposed increased vigor on one of these financial inputs, namely the discount rate, it has not addressed other ambiguous legal areas such as those related to stock-based compensation. From a tax perspective, this thesis indicates that there are significant improvements that the IRS can make to clarify its guidance for participants in a CSA. |
