For Transfer Pricing go to US Taxation for Foreigners

XIV.   Transfer Pricing

Under Sec. 482, discussed above, IRS is authorized to apportion or allocate gross income, deductions, etc. among two or more entities - the transfer pricing rules. Recent years have seen much discussion and legislation regarding transfer pricing. The taxpayer must now satisfy certain pricing, documentation and disclosure requirements, otherwise reallocation can occur regardless of taxpayer intentions, and whether the shifting was intentional or not. However, no allocations will be made in the case of certain small taxpayers who elect a specified safe harbor.

Revenue Procedure  "APA and Transfer Pricing Guidance" This revenue procedure explains how to obtain assistance from the US competent authority. The simplified procedure for small cases applies to individuals where the adjustment is under $200,000 and for Corporations / Partnerships under $1 million.

The penalties relating to understatement of transfer prices range from 20 - 40% of the underpayment.