## Facts

- Amazon restructured its European operations in 2005–2006 and entered into a cost-sharing arrangement (CSA) under I.R.C. § 482 with a Luxembourg affiliate.
- The CSA required a “buy-in” payment for the right to use Amazon’s pre-existing intangible assets developed in the United States, valued at fair market value.
- Amazon identified specified pre-existing intangibles (e.g., trademarks and website technology) and calculated a buy-in of about $255 million.
- The IRS determined the buy-in was not arm’s-length, valued the relevant intangibles at about $3.6 billion, and included “residual-business assets” (e.g., workforce in place, corporate culture, going concern value, goodwill, and growth options).
- Amazon challenged the IRS determination in the Tax Court; the Tax Court largely sided with Amazon and rejected the IRS’s expanded intangible-property base.
- The Commissioner appealed.

## Issues

1. Whether, under the pre-2009 version of Treas. Reg. § 1.482-4(b), “intangible property” for CSA buy-in purposes includes residual-business assets such as workforce in place, goodwill, going concern value, corporate culture, and growth options.
2. Whether the Tax Court committed reversible error in its valuation methodology for the qualifying pre-existing intangibles under § 482 and the applicable regulations.

## Decision

- The Ninth Circuit affirmed the Tax Court.
- The court held that, under the then-applicable Treas. Reg. § 1.482-4(b), “intangible property” did not include residual-business assets.
- The court construed the regulation to cover discrete, independently transferable intangibles of the listed types (or sufficiently similar items), not attributes representing the business as a whole.
- Because the IRS valuation was premised on an impermissibly broad asset definition, the Tax Court’s resulting valuation was not clearly erroneous.

## Legal Principles

- Under the pre-2009 Treas. Reg. § 1.482-4(b), “intangible property” for § 482 includes discrete, independently transferable intangibles (including listed categories and similar items), not residual-business assets inseparable from the ongoing enterprise.
- Regulatory text must be read in context; examples and structure can limit a broadly worded catchall to items of the same general type as enumerated property.
- Drafting history may confirm a regulation’s intended scope where the text is ambiguous, and an agency may not effectively expand a regulation through a litigating position.
- Although § 482 confers broad allocation authority, the Commissioner must apply that authority within the constraints of the regulations in force.
- Tax Court valuation determinations are reviewed primarily for clear error when they rest on factual findings and application of accepted valuation frameworks to the permissible asset base.

## Conclusion

The Ninth Circuit upheld the Tax Court’s buy-in determination by ruling that the pre-2009 transfer-pricing regulations limited CSA buy-ins to independently transferable intangibles and excluded residual-business assets such as workforce in place, goodwill, and going concern value, making the IRS’s expanded valuation approach inconsistent with the governing regulations.


Amazon.com, Inc. & Subsidiaries v. Comm’r of Internal Revenue, 934 F.3d 976 (9th Cir. 2019)