The United States (US) Internal Revenue Service (IRS) has published new frequently asked questions (FAQs) describing best practices and common mistakes in preparing transfer pricing documentation. The guidance is designed to encourage and help taxpayers to prepare improved documentation with an aim to decrease the number of issues selected for examination and improve the examination efficiency for the issues that are selected.BackgroundReasonable and adequate transfer pricing documentation can help taxpayers avoid certain penalties that might otherwise apply. Among other penalties, a net adjustment penalty under Internal Revenue Code1 Section 6662(e)(1)(B)(ii) can apply when a taxpayer’s net Section 482 transfer pricing adjustment exceeds the...