Transferring IP across a US border poses some unusual challenges and opportunities, not normally associated with tangible assets.
From the tax perspective, provided the arm’s length norm is observed the correct structuring of IP within a group can bring about significant benefits.
In cases where the IP has been developed in the US, it often makes sense to transfer the IP to a subsidiary in a low tax jurisdiction, especially where the IP has the potential to grow in value over time.
Conversely, where IP has been outside the US it sometimes makes sense to transfer the IP to a US entity, particularly if the group is being positioned for sale to a US purchaser.
Whenever IP is to be transferred across a US border, or cross US border royalty payments are to be made to a related party, a transfer pricing study should be undertaken to determine the arm’s length range of transfer price or royalty.
Virtually all cross border related party IP transfer payments and royalties have to be specifically disclosed to the IRS, and may be challenged in an IRS audit.  In the early stages of most IRS audits the taxpayer is presented with a “30 day letter” for the submission of transfer pricing documentation. Suitable documentation supporting transfer prices is generally required to have been in existence by the time of submitting the taxpayer’s returns.