Medtronic Ruling Bolsters IRS-Favored Transfer Pricing Method

The Eighth Circuit’s decision to send the Medtronic case back to the Tax Court brings more certainty for companies involved in intercompany transactions by squashing the court’s controversial method to resolve the dispute.

The appeals court didn’t rule clearly Wednesday for either Medtronic Inc. or the IRS, but it leaned more toward the agency. And it emphatically nixed the Tax Court’s choice to apply its own unspecified transfer pricing method to Medtronic’s intellectual property deal with its Puerto Rican subsidiary.

That Tax Court choice had sparked an uproar from tax practitioners, who took issue with the court’s essentially inventing its ...