The court found that the CUT method was the correct method to use and that the Pacesetter agreement was a comparable uncontrolled transaction
. Like Medtronic's expert, the court started with the Pacesetter agreement royalty rate, made what it considered to be the correct adjustments due to the differences between the Pacesetter and Medtronic US-MPROC license agreements, and converted the rate from retail to wholesale.
Benchmark the comparable uncontrolled transactions
against the terms and conditions in use with the European parent and U.S.
Application of the Comparable Uncontrolled Transaction
Method to the Controlled Transfer of Intangible Property
In the case of non-integral services, neither the service provider nor recipient is normally in a position to develop comparable uncontrolled transaction
The manual discusses the transfer pricing methods available for the transfer of intangible property: comparable uncontrolled transaction
(CUT) and CPM.
Rossi explained one reason the safe harbor is helpful is that, in the case of non-integral services, neither the service provider nor recipient is normally in a good position to develop comparable uncontrolled transaction
This is administratively beneficial for both taxpayers and for tax authorities, because in the case of non-integral services, neither the service provider nor recipient is normally in a good position to develop comparable uncontrolled transaction
The Regulations provide for a number of "specified" transfer pricing methods ("TPMs"), including transactional methods such as resale price, cost-plus, comparable uncontrolled price ("CUP"), and comparable uncontrolled transaction
("CUT"), as well as profit-based methods such as the comparable profits method ("CPM") and several profit-split methods.
regulations(5) and, absent a comparable uncontrolled transaction
, suggests a consideration of all factors, including prevailing rates in the industry, terms of the license, singularity of the invention, services provided, anticipated profits to be received by the licensee, and benefits to the licensor from sharing information on the experience of the licensee.
[section] 1.482-1T(c)(4)(i) provides that the price for a controlled transfer may be other than the amount charged in a comparable uncontrolled transaction
"because the controlled transfer is subject to a pricing strategy that is undertaken to enter new markets, to increase a product's share in an existing market, or to meet competition in an existing market." The controlled transaction must bear a price that would have been charged in an uncontrolled transaction under comparable conditions.
Integrated firms arise precisely in order to deviate from arms-length prices in comparable uncontrolled transactions
. (60) Integrated firms can take advantage of economies of scale, organizational efficiencies and saved transaction costs.
In relation to the ex post approach, the Draft proposes to insert the following language in paragraph 3.70 "pricing confirmations should be based on information available at the time the tax return is prepared, providing such information is related to the outcome of comparable uncontrolled transactions
undertaken at the same time as the controlled transaction ...." Regrettably, this proposed requirement does not take into account the practical issues involved in updating information on an ex post basis when filing a tax return.