The present value of each controlled participant’s nonroutine residual divisional profit or loss must be determined to reflect the most reliable measure of an arm’s length result. The present value of nonroutine residual divisional profit or loss equals the present value of the stream of the reasonably anticipated residuals over the duration of the CSA Activity of divisional profit or loss, minus market returns for routine contributions, minus operating cost contributions, minus cost contributions, using a discount rate appropriate to such residuals in accordance with paragraph (g)(2)(v) of this section. As used in this paragraph (g)(7), the phrase “market returns for routine contributions” includes market returns for operating cost contributions and excludes market returns for cost contributions.
§ 1.482-7(g)(7)(iii)(B) Determine nonroutine residual divisional profit or loss.
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-7 Methods to determine taxable income in connection with a cost sharing arrangement | Tag: CCA/CSA, CCA/CSA - methods for pricing, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Pre-existing intangibles, Residual Profit Split Method (RPSM), Valuation, Valuation of intangibles
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