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Preferred shares and transfer pricing

April 20, 2010

Gordon Hands of CUFTanalytics explains how taxpayers can assess the arm’s-length dividend rate for intercompany preferred share issuances.

If the capital structure decision, on a tax effective basis, is made, as part of a multinational’s overall intra-group financing strategy, to have a member of the group issue preferred shares to a related party then there is a transfer pricing issue; what is the arm’s length dividend rate for the intercompany preferred share issue?

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