Tax Controversy

Cornerstone Research provides a multidisciplinary approach to addressing issues arising in complex tax matters. We draw on expertise in economics, accounting, finance, marketing, and technology in our consulting to taxpayers and the Internal Revenue Service.

Tax Controversy Capabilities

Transfer Pricing of Intangible Assets

Cornerstone Research has assisted experts for both taxpayers and the IRS opining on a wide variety of issues in transfer pricing matters. Our work has covered all stages of disputes, including discovery, expert report filings, depositions, and trial. We have worked on disputes involving transfer pricing–related transactions such as platform contributions, licensing, and cost-sharing agreements. Our experience involves taxpayers operating in the technology sector (such as online platforms), computer software and hardware, consumer packaged goods, medical devices, and the pharmaceutical industry.

Intercompany Financing Transactions

Cornerstone Research has worked on matters involving whether interest charged in intercompany financing transactions reflects the risk of the entity receiving a loan. Our experience includes:

  • Analyzing debt capacity.
  • Identifying and analyzing comparable debt transactions.
  • Determining the appropriate rating methodology to apply for a non-rated, fully owned subsidiary.
  • Analyzing a company’s cash managements and treasury systems to determine how the company performed its internal banking services and how it managed its liquidity.
  • Analyzing a company’s debt capacity to assess whether it would have been able to issue and refinance an equivalent amount of intercompany debt to third parties.
  • Determining an appropriate arm’s-length guarantee fee payment to compensate a parental guarantee for an intercompany loan transaction.

Tax-Advantaged Transactions

Cornerstone Research has worked with experts to assess the economic substance of complex transactions. Our experience includes:

  • Evaluating the fundamental requirements for tax-advantaged transactions (also known as tax shelters) to be sustained if challenged by the IRS, including whether transactions had a reasonable business purpose.
  • Assisting in calculating the expected value of tax-advantaged transactions given the contemplated tax benefits, upfront costs, risk of audit, chance of disallowance if audited, and potential penalties.
  • Evaluating the responsibilities and duties of taxpayers and tax advisors, and the importance of the representations and assumptions underlying tax-advantaged transactions.
  • Evaluating whether certain transactions economically qualify as a sale. In addition, we have analyzed how certain deferred tax assets of a firm, such as Net Operating Loss carryforwards, can affect transactions.

Financial Asset Transactions

In tax dispute contexts, Cornerstone Research has experience valuing covered stock option awards, warrants, uncertain tax benefits, and deferred tax assets, among other financial assets.

We have analyzed corporate and individual tax treatments of employee stock options related to stock option backdating allegations. For corporations, we examined the financial statement changes of alternative treatments and gauged whether those were material changes. For individuals, we reviewed how they reported their stock options on their taxes as evidence of when and how stock options were granted.

Business Classification

Cornerstone Research has assessed whether entities meet the criteria to qualify to be classified as a certain kind of business for tax purposes. For example, we have performed assessments of whether an entity should qualify as a not-for-profit.