IRS Proposed Regulations on Differential Income Stream as Specified Application Of the Income Method [REG-145474-1176 Fed. Reg. 90309, 12/23/11]

The IRS has issued REG-145474-11, which contains a proposed amendment to the regulations under Section 482 that describes the specific application of the income method using the differential income stream. The determination of the arm's length charge for the PCT Payment can be derived by discou...

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Bibliographic Details
Published inTax Management Transfer Pricing Report Vol. 20; no. 17; p. 767
Main Author Miller, Steven T
Format Trade Publication Article
LanguageEnglish
Published Washington Bloomberg BNA 12.01.2012
Subjects
Cost sharing
Discount rates
Income taxes
Internal Revenue Code
Proposals
Public hearings
REG-145474-11
Regulation
Section 482
Tax regulations
Taxable income
Transfer pricing
United States > US
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Summary:The IRS has issued REG-145474-11, which contains a proposed amendment to the regulations under Section 482 that describes the specific application of the income method using the differential income stream. The determination of the arm's length charge for the PCT Payment can be derived by discounting the differential income stream at an appropriate rate. The differential income stream approach to determining PCT Payments depends on reliably determining the discount rate associated with the differential income stream. This, in turn, requires an understanding of the economic meaning of the differential income stream. For example, assume a CSA in which the PCT Payor does not contribute any platform or operating contributions, and undertakes only routine exploitation activities for which it anticipates a routine return.
ISSN:1063-2069