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Pat Smith Quoted in Tax Notes on Government Response To Taxpayer’s Petition for Rehearing En Banc in Ninth Circuit Altera Case.


IPB attorney Pat Smith was quoted in a Tax Notes article on the government’s response to the petition for rehearing en banc that was filed by the taxpayer in the Ninth Circuit Altera case. No Basis for Rehearing in Altera, Government Argues.

Patrick J. Smith of Ivins, Phillips & Barker Chtd. told Tax Notes he found the government’s Chenery argument “extremely unpersuasive.”

Smith said there was a Chenery problem because in the preambles to the proposed and final regs, Treasury and the IRS cited the language in the 1986 Conference Report to support the proposition that sharing stock-based compensation is what unrelated parties would do.

By contrast, the government and the Ninth Circuit majority relied on that language for the proposition that it doesn’t matter whether unrelated parties would agree to share stock-based compensation, Smith said.

Also, Treasury and the IRS never expressed the view that cost-sharing arrangements represent transfers of intangibles so as to make the commensurate with income standard directly applicable to cost-sharing arrangements, Smith said. However, the conclusion that cost-sharing arrangements should be considered transfers of intangibles “was a crucial part of the reasoning in the Ninth Circuit’s majority opinion in upholding the validity of the regulations,” he noted.

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