IRS Sues Microsoft in Fight Over Records on Intangibles, Cost Sharing

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Dec. 15— The Internal Revenue Service filed a petition in U.S. district court to enforce a summons against Microsoft Corp. to produce “books, records, papers and other data” related to the pricing of intangibles under two cost-sharing arrangements (United States v. Microsoft Corp., W.D. Wash., No. 2:14-mc-00117, petition filed 12/11/14).

According to IRS filings, the company's transfer pricing methods used in the cost-sharing arrangements are in dispute and if rejected, could lead to a multi-billion-dollar income adjustment to Microsoft's taxable income for the period.

The petition, filed Dec. 11 in the U.S. District Court for Western Washington, said Microsoft only partially complied with information document requests related to an IRS audit of tax years 2004 through 2006. The cost-sharing arrangements involve Microsoft affiliates in Puerto Rico and Bermuda.