The U.S. Internal Revenue Service is examining Facebook Inc over its transfer of various rights associated with its worldwide business to a holding company in Ireland, according to court papers.
The U.S. Justice Department filed a lawsuit on Wednesday in federal court in San Francisco seeking to enforce IRS summonses served on Facebook and to force the company to produce various documents as part of the agency’s examination.
The lawsuit said that the documents in question relate to an IRS examination of the company’s tax liability for 2010, when Facebook’s tax return reported royalty income from transfers of intangible property to Facebook Ireland Holdings Unlimited.
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Facebook transferred rights associated with its worldwide business to the Irish company, with the exception of the United States and Canada, the lawsuit said.
The lawsuit that Facebook retained accounting firm Ernst & Young to value the transfers for tax purposes, but that information gathered by the IRS to date has suggested that valuation approach was “problematic.”