KPMG article: Analysis of AM 2025-001 and the IRS’ imposition of periodic adjustments under Treas. Reg. § 1.482-4

AM 2025-001 appears to be a change in the IRS’ position on the application of commensurate with income (CWI) standard.

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June 3, 2025

The IRS Chief Counsel in January 2025 issued AM 2025-001, in which it asserted that unless one of the regulatory exceptions to the periodic adjustment rules under Treas. Reg. § 1.482-4 applies, periodic adjustments will invariably be correct, no matter what an arm’s-length analysis might show. This appears to be a change in the IRS’ position on the application of commensurate with income (CWI) standard and its implementing regulations.

Read a KPMG article* prepared by KPMG LLP tax professionals that provides an overview of the periodic adjustment rules under Treas. Reg. § 1.482-4, discusses a few of the flaws of AM 2025-001, and considers possible defenses for taxpayers if the IRS chooses to exercise its authority to impose periodic adjustments.

*This article appears in Tax Notes Federal (May 26, 2025) and is provided with permission.

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