Reasonably anticipated benefits. Controlled parties A and B enter into a cost sharing arrangement to develop product and process intangibles for an already existing Product P. Without such intangibles, A and B would each reasonably anticipate revenue, in present value terms, of $100M from sales of Product P until it became obsolete. With the intangibles, A and B each reasonably anticipate selling the same number of units each year, but reasonably anticipate that the price will be higher. Because the particular product intangible is more highly regarded in A’s market, A reasonably anticipates an increase of $20M in present value revenue from the product intangible, while B reasonably anticipates only an increase of $10M. Further, A and B each reasonably anticipate spending an extra $5M present value in production costs to include the feature embodying the product intangible. Finally, A and B each reasonably anticipate saving $2M present value in production costs by using the process intangible. A and B ... Read more

Cost shared intangible. The facts are the same as in Example 3, except that in the course of developing XYZ, the controlled participants by accident discover ABC, a cure for disease D. ABC is a cost shared intangible under the CSA ... Read more

Cost shared intangible, reasonably anticipated cost shared intangible. U.S. Parent (USP) has developed and currently exploits an antihistamine, XY, which is manufactured in tablet form. USP enters into a CSA with its wholly-owned foreign subsidiary (FS) to develop XYZ, a new improved version of XY that will be manufactured as a nasal spray. Work under the CSA is fully devoted to developing XYZ, and XYZ is developed. During the development period, XYZ is a reasonably anticipated cost shared intangible under the CSA. Once developed, XYZ is a cost shared intangible under the CSA ... Read more

Controlled participants. (i) U.S. Parent (USP), one foreign subsidiary (FS), and a second foreign subsidiary constituting the group’s research arm (R + D) enter into a CSA to develop manufacturing intangibles for a new product line A. USP and FS are assigned the exclusive rights to exploit the intangibles respectively in the United States and the rest of the world, where each presently manufactures and sells various existing product lines. R + D is not assigned any rights to exploit the intangibles. R + D’s activity consists solely in carrying out research for the group. It is reliably projected that the RAB shares of USP and FS will be 662⁄3% and 331⁄3%, respectively, and the parties’ agreement provides that USP and FS will reimburse 662⁄3% and 331⁄3%, respectively, of the IDCs incurred by R + D with respect to the new intangible. (ii) R + D does not qualify as a controlled participant within the meaning of paragraph (j)(1)(i) of this section, ... Read more

Controlled participant. Foreign Parent (FP) is a foreign corporation engaged in the extraction of a natural resource. FP has a U.S. subsidiary (USS) to which FP sells supplies of this resource for sale in the United States. FP enters into a CSA with USS to develop a new machine to extract the natural resource. The machine uses a new extraction process that will be patented in the United States and in other countries. The CSA provides that USS will receive the rights to exploit the machine in the extraction of the natural resource in the United States, and FP will receive the rights in the rest of the world. This resource does not, however, exist in the United States. Despite the fact that USS has received the right to exploit this process in the United States, USS is not a controlled participant because it will not derive a benefit from exploiting the intangible developed under the CSA ... Read more

The following examples illustrate certain definitions in paragraph (j)(1)(i) of this section: ... Read more

For purposes of this section – Term Definition Main cross references Acquisition price § 1.482-7(g)(5)(i). Adjusted acquisition price § 1.482-7(g)(5)(iii). Adjusted average market capitalization § 1.482-7(g)(6)(iv). Adjusted benefit shares § 1.482-7(i)(2)(ii)(A). Adjusted RPSM § 1.482-7(i)(6)(v)(B). Adjustment Year § 1.482-7(i)(6)(i). ADR § 1.482-7(i)(6)(iv). AERR § 1.482-7(i)(6)(iii). Applicable Method § 1.482-7(g)(2)(ix)(A). Average market capitalization § 1.482-7(g)(6)(iii). Benefits Benefits mean the sum of additional revenue generated, plus cost savings, minus any cost increases from exploiting cost shared intangibles. § 1.482-7(e)(1)(i). Capability variation § 1.482-7(f)(3). Change in participation under a CSA § 1.482-7(f). Consolidated group § 1.482-7(j)(2)(i). Contingent payments § 1.482-7(h)(2)(i)(B). Controlled participant Controlled participant means a controlled taxpayer, as defined under § 1.482-1(i)(5), that is a party to the contractual agreement that underlies the CSA, and that reasonably anticipates that it will derive benefits, as defined in paragraph (e)(1)(i) of this section, from exploiting one or more cost shared intangibles. § 1.482-7(a)(1). Controlled transfer of interests § 1.482-7(f)(2). Cost contribution § 1.482-7(d)(4). Cost shared intangible Cost shared ... Read more

... Read more

... Read more