United States: Brattle Client Amazon.com Wins In $1.5 Billion Transfer Pricing Dispute
Last Updated: April 6 2017

Amazon.com (Amazon) prevailed in its $1.5 billion tax dispute with the Internal Revenue Service (IRS) arising from the company's 2005 transfer of technology and marketing intangible property to its European subsidiary. The Brattle Group provided economic consulting support to several expert testifiers on behalf of Amazon.

In his ruling on March 23, 2017, U.S. Tax Court Judge Albert G. Lauber agreed with Amazon's experts' methods of valuing the transferred intangible property as three distinct groups of assets (website technology, marketing intangibles, and customer information) and rejected the position of the IRS' experts that the transfer of intangibles should be treated as economically equivalent to the sale of an entire business. Specifically, Judge Lauber found that Amazon's experts' use of Comparable Uncontrolled Transactions (CUTs) to value each group of assets was more reasonable than the IRS experts' discounted cash flow analysis. He also agreed with Amazon's experts that the transferred intangible property had a finite life, rather than a perpetual or indefinite life.

Brattle consultants involved in this matter included Lynda Borucki, Lisa Cameron, Steve Herscovici, Adoria Lim, Bin Zhou, Christine Polek, and Lucrezio Figurelli. Working closely with attorneys at Morgan Lewis & Bockius, Skadden, Arps, Slate, Meagher & Flom LLP, and Amazon, we addressed multiple economic aspects of the case, including identifying and supporting the following testifying experts:

  • Professor Haim Mendelson of the Stanford Graduate School of Business, who testified on the expected useful life of Amazon's technology platform, explaining that the lack of significant entry barriers in e-retailing forces firms in this sector to constantly innovate in order to retain customers.
  • James Roper of Interactive Media in Retail Group (IMRG) in London, who provided context to the state of e-retailing in Europe in 2005, detailing the innovations that were necessary in order for e-retailing in general, and Amazon in particular, to expand in Europe.
  • Michael Lasinski of intellectual property valuation firm 284 Partners, who testified that the IRS's marketing experts' selection and use of CUTs for Amazon's marketing intangibles, trademarks, and domain names were inconsistent with arm's-length behaviors.
  • Professor Roman Weil of the University of Chicago Booth School of Business (Emeritus), who testified on Amazon's allocation of costs attributable to the development of intangible property.


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