4 ms·

IANAL, Retroactively going after the valuation of assets based on success years on is awkward at the least, and dangerous at the worst. FB is right, they were

IANAL, Retroactively going after the valuation of assets based on success years on is awkward at the least, and dangerous at the worst. FB is right, they were still pretty unproven in 2010. It took nearly 1.5 years after their IPO before they convinced people they could make money. I agree, it seems like they would be looking for evidence of undervaluing. But like, let's say you are discount potential cash flows. I don't even know if FB was profitable in 2010, what kind of projected cash flows are you going to have? I just think that if the governments cared about this so much, they would actually fix this. The double irish is going away, but while the US had a chance to fix stuff in 2018, there's still incentive to offshore IP, and in fact, reinforces the advantage of offshoring production.

james1071 7y ago
You don't need to be a lawyer to understand what this is all about and it certainly isn't hindsight, as you have suggested. The reason why the IRS are challenging FB is that Apple's Irish tax arrangements became public and were very embarrassing to the US authorities, which were revealed not to be applying US law. Now, to the matter of hindsight. The essential point is that the transactions have to be a sham to work. There is precisely no point in selling IP from a US subsidiary to one in Ireland at a fair price. That would just trigger an immediate taxable event in the US for no benefit whatsoever. The transaction is by design intended to sell IP at a large undervalue and the game was to satisfy the US and Irish authorities, both of which were happy to play along.
- gimmeThaBeet 7y ago
  >There is precisely no point in selling IP from a US subsidiary to one in Ireland at a fair price. That would just trigger an immediate taxable event in the US for no benefit whatsoever. Apparently there is if you want to book your international operations in Ireland without the IRS dragging you to court saying you lowballed them a decade ago. Facebook had a funding round in mid 2009, and mid 2010. The 2009 valuation was $9.8B, and $13.8B in 2010. And this case is solely about their ex-US operations, which they're saying basically didn't exist at the time. I mean it's like if you join a startup, how much are your equity options worth? Does the IRS go back and say your options were worth way more because it turns out you were working at the next Netflix or something?

james1071 7y ago

You don't need to be a lawyer to understand what this is all about and it certainly isn't hindsight, as you have suggested. The reason why the IRS are challenging FB is that Apple's Irish tax arrangements became public and were very embarrassing to the US authorities, which were revealed not to be applying US law. Now, to the matter of hindsight. The essential point is that the transactions have to be a sham to work. There is precisely no point in selling IP from a US subsidiary to one in Ireland at a fair price. That would just trigger an immediate taxable event in the US for no benefit whatsoever. The transaction is by design intended to sell IP at a large undervalue and the game was to satisfy the US and Irish authorities, both of which were happy to play along.

gimmeThaBeet 7y ago
>There is precisely no point in selling IP from a US subsidiary to one in Ireland at a fair price. That would just trigger an immediate taxable event in the US for no benefit whatsoever. Apparently there is if you want to book your international operations in Ireland without the IRS dragging you to court saying you lowballed them a decade ago. Facebook had a funding round in mid 2009, and mid 2010. The 2009 valuation was $9.8B, and $13.8B in 2010. And this case is solely about their ex-US operations, which they're saying basically didn't exist at the time. I mean it's like if you join a startup, how much are your equity options worth? Does the IRS go back and say your options were worth way more because it turns out you were working at the next Netflix or something?