Academic journal article Journal of Accountancy

IRS Wins Procedural Issue in Yamaha

Academic journal article Journal of Accountancy

IRS Wins Procedural Issue in Yamaha

Article excerpt

The IRS won an important procedural issue recently in Yamaha Motor Corp. U.S. v. Commissioner (T.C.M. 1992-110), a case brought under section 482 of the tax code. The Tax Court denied the taxpayer's motion to shift the burden of proof to the IRS, finding the IRS's amended answer to the taxpayer's petition did not raise a "new matter" proscribed under Tax Court Rule 142(a).

In its deficiency notice (totaling about $135 million), the IRS had allocated income to Yamaha-U.S. based on "tangible property purchased for resale" from the Japanese parent company.

After the case went to court, the IRS amended its answer, alleging that a part of the deficiency was attributable to advertising and sales promotion expenses or, alternatively, for the maintenance of excessive inventory, on behalf of the Japanese parent. In either case, the IRS was empowered to allocate to Yamaha-U.S. an arm's length consideration for these services.

Yamaha-U.S. filed a motion claiming the "services" theory raised a "new matter" requiring the presentation of different evidence and therefore shifted the burden of proof to the IRS under rule 142(a). …

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