Transfer Pricing and Valuation of Assets

Please prepare a response to the following post:
Transfer pricing occurs when goods and services are exchanged between affiliate or subsidiary domestic and multinational firms and is built into the tax code. IRC 482 lays the ground rules so that corporations don’t abuse the system. As tax professionals, it is not our job to agree or disagree. It is our responsibility, when presented with the situation, to advise our client of the accurate value of the assets to prevent a material misstatement.
Section 4.61.3.4.9 relates directly to intangible property specifically and Reg. 1.482-4 describes the methods used to determine what constitutes “an arm’s length charge for a controlled transfer of intangible property”. Further, Section 367(d) speaks to the requirement to include in gross income the amount that represents that arm’s length charge.
It seems to me that the real issue is valuation. Corporations prefer a higher valuation resulting in lower potential tax liability. The IRS prefers a higher (or at least more accurate) valuation resulting in a greater tax liability. The job of the IRS examination team is to determine whether the corporation’s valuation is understated.
Part of the examination process is to compute financial ratios, make industry comparisons, and decide if the corporation participates in cross-border income shifting. I know that companies work very hard at minimizing their tax liability – don’t we all? But eventually, the government looks at historical reporting and compares that to published corporate valuations and realizes that something’s amiss.