Parent licenses an intangible to Sub. FC law generally prohibits payments by any person within FC to recipients outside the country. The FC law meets the requirements of paragraph (h)(2)(ii) of this section. There is no evidence of unrelated parties entering into transactions under comparable circumstances for a comparable period of time, and the foreign legal restrictions will not be taken into account in determining the arm’s length amount. The arm’s length royalty rate for the use of the intangible property in the absence of the foreign restriction is 10% of Sub’s sales in country FC. However, because the requirements of paragraph (h)(2)(ii) of this section are satisfied, Parent can elect the deferred income method of accounting by attaching to its timely filed U.S. income tax return a written statement that satisfies the requirements of paragraph (h)(2)(iii)(B) of this section.
§ 1.482-1(h)(2)(v) Example 1.
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-1 Allocation of income and deductions among taxpayers | Tag: Deferred income method, Deferred Income , Example, Foreign legal restrictions, Governmental regulation, Legal restrictions
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