Non-aggregation of transactions that are not interrelated. P enters into a license agreement with S1 that permits S1 to use a proprietary process for manufacturing product X and to sell product X to uncontrolled parties throughout a specified region. P also sells to S1 product Y, which is manufactured by P in the United States and unrelated to product X. Product Y is resold by S1 to uncontrolled parties in the specified region. There is no connection between product X and product Y other than the fact that they are both sold in the same specified region. In evaluating whether the royalty paid by S1 to P for the use of the manufacturing process for product X and the transfer prices charged for unrelated product Y are arm’s length amounts, it would not be appropriate to consider the combined effects of these separate and unrelated transactions.
§ 1.482-1T(i)(E) Example 4.
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-1T Allocation of income and deductions among taxpayers (temporary). | Tag: Actual transaction, Aggregated transactions, Aggregation , Best Method Rule, Entire arrangement, Example, Form or character of the transaction, Labels, Licence agreement, Most appropriate net profit indicator, Selective advantage
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