Transfer Pricing: Document Requests and Summons Enforcement (Portfolio 6925)

Tax Management Portfolio, Transfer Pricing: Document Requests and Summons Enforcement, No. 6925, provides a detailed explanation of the general summons power and other tools to compel or encourage taxpayers to provide information and documents, including §982 document requests, designated summonses, §6038A and §6038C summonses, and third-party summonses. To view this Portfolio, take a free trial to Bloomberg Tax.

Description

Tax Management Portfolio, Transfer Pricing: Document Requests and Summons Enforcement, No. 6925, provides a detailed explanation of the general summons power and other tools to compel or encourage taxpayers to provide information and documents, including §982 document requests, designated summonses, §6038A and §6038C summonses, and third-party summonses.

Authors

Kevin L. Kenworthy, Esq.

Kevin L. Kenworthy, Miller & Chevalier Chartered; University of Oklahoma (B.A. 1982, with distinction); Southern Methodist University School of Law (J.D. 1985, Order of the Coif); member, District of Columbia Bar, Oklahoma Bar.

Kathryn Morrison Sneade, Esq.

Kathryn Morrison Sneade, University of Virginia (B.A. 2001, with highest distinction, Phi Beta Kappa; J.D. 2004); member, District of Columbia Bar, Virginia Bar. At the time this Portfolio was written, Ms. Morrison Sneade was affiliated with Miller & Chevalier Chartered. She is now an attorney in the Office of Chief Counsel, Internal Revenue Service (Financial Institutions & Products, Branch 4 (Insurance)).

Andrew C. Strelka, Esq.

Andrew C. Strelka, Latham & Watkins LLP; University of Virginia (B.A. 2002); American University Washington College of Law (J.D. 2008, cum laude); Georgetown University Law Center (LL.M. with distinction, dean's list); member, District of Columbia Bar, New York Bar, Connecticut Bar; formerly with Miller & Chevalier Chartered.

Table of Contents

Portfolio Description
Authors
Description
Detailed Analysis
I. Introduction
A. General
B. The Service Typically Obtains Information Through Informal Means
1. General
2. The IDR Process
a. The LB&I IDR Process
b. Request for Section 6662(e) Documentation
c. IDR Enforcement Process
3. Best Practices
II. Summonses
A. Generally
B. Service
C. Scope of the Request
D. Judicial Enforcement
1. Standard for Enforcement Under Powell
a. Legitimate Purpose
b. Relevance
c. Information Sought Not Already in the Service's Possession
d. Administrative Requirements Satisfied
2. Evidentiary Hearings
3. Summonses and the U.S. Tax Court
4. Suspension of Limitations Periods
5. Privilege Protection in the Face of a Summons
a. Selective Waivers
b. Workpapers
E. The Challenge of Electronically Stored Information
1. Overview of the ESI Problem
2. Court Rules Address Procedural Problems Associated with Discovery of ESI
a. Proportionality Principle
b. Preserving Privilege
c. Spoliation
III. Section 982: Requests for Documents Maintained in Foreign Countries
A. Overview
B. Reasonable Cause Exception
C. Motion to Quash §982 Formal Document Request
IV. The Designated Summons Under §6503(j)
A. The Nature and Purpose of the Designated Summons
B. Section 6503(j): The Designated Summons and Its Effect upon the Statute of Limitations
1. The Statutory Definition of the Designated Summons
2. The Effect of §6503(j) upon the Statute of Limitations
C. Current Developments and Debate
1. IRS Use of the Designated Summons
2. The Response to Perceived Abuses of the Designated Summons Power
3. United States v. Microsoft
V. Sections 6038A and 6038C
A. Overview
B. Information Reporting and Record Maintenance Requirements Under §6038A and §6038C
1. Overview of §6038A and §6038C
2. Monetary and Criminal Penalties
3. The Avoidance of Monetary Penalties
C. Authorization of an Agent
1. Authorization Requirement and Procedure
2. Effect of Designation of Agent
3. Penalty for Noncompliance with Authorization Requirement and Avoidance of Penalty
D. Summonses Under §6038A and §6038C
1. Overview
2. IRM Procedures and Limitations on the Use of §6038A and §6038C Summonses
E. Penalties for Noncompliance with Agent Designation Requirement or §6038A or §6038C Summons
VI. Third-Party Summonses and Other Information Requests
Introductory Material
A. Informal Information Gathering from Third Parties
1. Notice of Service Contact with Third Parties
2. The “Friendly Summons”
B. Service and Form of Third-Party Summons
C. Taxpayer Notice of Third-Party Summons
1. Scope
2. Notice
D. Taxpayer Challenges to Third-Party Summonses
1. Intervention in Enforcement Proceedings Brought Against Third Party
2. Taxpayer Petition to Quash
3. Suspension of the Statute of Limitations
E. Third Party's Right to Receive Fees and Costs
F. Strategies for Handling Third-Party Summonses

Working Papers

Table of Worksheets
Worksheet 1 IRM Exhibit 4.60.8-7 (Nonacceptance of Limited Authorization)
Worksheet 2 IRM Exhibit 4.60.8-9 (Authorization of Agent — Foreign Parent on Behalf of Itself and/or Other Foreign Related Parties)
Worksheet 3 IRM Exhibit 4.60.8-12 (Authorization of Agent — U.S. Reporting Corp. on Behalf of Itself and Any Consolidated Subsidiaries)
Worksheet 4 IRM Exhibit 4.61.3-1 (On-Site Visitations)
Worksheet 5 IRM Exhibit 4.61.3-4 (Transfer Pricing Functional Analysis Questionnaire)
Worksheet 6 IRM Exhibit 4.61.4-1 (Formal Document Request IRC Section 982)
Worksheet 7 Issuing a Formal Document Request When a US Taxpayer is Unresponsive to an IDR
Worksheet 8 IDR (Section 936 Exit Strategies)
Worksheet 9 IDR (Cost Sharing — Stock-based Compensation: Elective Grant Measurement Method under §1.482-7(d)(2)(iii)(B))
Worksheet 10 IDR (Cost Sharing — Stock-based Compensation: Exercise Measurement Method under §1.482-7(d)(2)(iii)(A))
Worksheet 11 Form 2039 (Summons)