The recent IRS Coordinated Issues Paper (CIP) on cost-sharing buy-ins lays the groundwork for a new emphasis on unspecified methods in applying the best method rule to cost sharing arrangements, citing an income approach to initial buy-in valuation and an acquisition price-based approach to subsequent buy-ins. The CIP goes on to challenge some of the traditional valuation methods for cost sharing buy-ins, forcing taxpayers to re-examine the way they define and quantify intangible contributions. This article examines this new reality and offers some recommendations for how best to examine initial buy-in transactions in a world where the IRS does not always believe that valuation based on the sum of the parts (of individual contributed intangibles) adds up to the whole of intangible value contribution.
