Law360 Quotes Elizabeth Stevens on Accounting for the Pandemic's Impact

Law360 Tax Authority

Companies dealing with economic fallout from the coronavirus pandemic should think twice about invoking an act of God to back out of transactions with foreign affiliates when unrelated parties in similar circumstances wouldn't do so, an IRS official said Friday.

. . .

A more mundane question about the pandemic's impact is how to account for unexpected expenses in a transfer pricing context. Panelist Elizabeth Stevens of Caplin & Drysdale noted that the OECD guidance advises careful consideration of when costs are exceptional and thus eligible for deductions. Not all costs related to the pandemic fall into that category, she said.

"The expenses to outfit your employees with home-office hardware and Zoom accounts, those are really just substitutes for regular operating expenses and should be treated in the same way you would treat in-office overhead," Stevens said.

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