In noting the comparability, the court also pointed out the following: (1) Veritas Ireland and the OEMs undertook similar activities and employed similar resources in conjunction with such activities, (2) there were no significant differences in contractual terms, (3) the parties to the controlled and uncontrolled transactions bore similar market risks and other risks, and (4) there were no significant differences in property or services provided.
As a result, the court was satisfied that the unbundled OEM agreements were sufficiently comparable to the controlled transaction with the result that the CUT method is the best method to determine the appropriate buy-in price. The buy-in payment actually charged met the arm's-length standard with the result that the IRS commissioner's conception of what the buy-in payment should be was summarily rejected.
Contributing editor Robert Willens, founder and principal of Robert Willens LLC, writes a weekly tax column for CFO.com.
Footnote
1 See Veritas Software Corporation & Subsidiaries v. Commissioner, 133 T.C. No. 14 (2009).
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