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Indiana Tax Court rules transfer pricing studies should be respected when determining Indiana income

The Indiana Tax Court on Dec. 18, 2015, granted a taxpayer’s motion for summary judgment and held that the Indiana Department of Revenue improperly adjusted the taxpayer’s Indiana source income to correct a perceived unfair reflection based on application of Indiana’s standard sourcing rules. The court noted that the department’s available remedy was limited to the use of reasonable alternative methods to divide the taxpayer’s tax base, and that the intercompany transactions between the taxpayer and its parent and affiliate included in the computation were conducted at arm’s-length rates. Therefore, the standard sourcing rules fairly reflected the taxpayer’s Indiana source income.

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