The U.S. Tax Court, in Amazon.com, Inc. & Subsidiaries v. Commissioner, has denied Amazon’s motion for partial summary judgement, concluding that there are genuine disputes of material fact necessary to determine to whether IRS abused its discretion in adjusting amounts under a cost sharing agreement between Amazon’s U.S. operations and a Luxembourg affiliate.
The court said that it could not rule on whether the IRS abused its discretion by allocating 100 percent of costs in certain costs centers to intangible development costs (IDCs) under section 1.482-7(d)(1) of the Income Tax Regs., as Amazon urged, unless Amazon first establishes that the cost center contains a non-trivial amount of “mixed costs,” namely costs that benefit other business activities as well as intangible development.
The court also said that Amazon is not entitled, as a matter of law, to apply an allocation method to determine IDCs under section 1.482-7(d)(1) of the Income Tax Regs. in the absence of Amazon first showing that the cost centers in question contain “mixed costs.” Amazon.com, Inc. & Subsidiaries
