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Facebook might have cut its tax bills after potentially underestimating the value of intellectual property it transferred to its Irish subsidiary by "billions of dollars", the US Internal Revenue Service IRS said on Friday 8 July .

US authorities are investigating whether the world's largest social media network deliberately underestimated its US income by selling rights to an Irish subsidiary too cheaply.

The practice would have allowed Facebook to reduce its taxable income in the US, which has a corporate tax rate of at least 35%, and boost its income in Ireland, where the tax rate stands at 12.5%.

On Wednesday, the US Justice Department filed a lawsuit in San Francisco, calling for the social network to produce a series of documents as part of the probe.

The Nasdaq-listed company's tax adviser Ernst & Young E were in charge of determining the price for the intangible property, according to the lawsuit.

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