The facts are the same as in Example 1, except that USP accounts for supervisory, general, and administrative costs as operating expenses, which are not allocated to its sales to FS. The gross profit markups of UT1, UT2, and UT3, however, reflect supervisory, general, and administrative expenses because they are accounted for as costs of goods sold. Accordingly, the gross profit markups of UT1, UT2, and UT3 must be adjusted as provided in paragraph (d)(3)(iii)(B) of this section to provide accounting consistency. If data is not sufficient to determine whether such accounting differences exist between the controlled and uncontrolled transactions, the reliability of the results will be decreased.
§ 1.482-3(d)(4) Example 2.
Category: (d) Cost plus method, Transfer Pricing Guidelines, US IRC Section 482 on Transfer Pricing, § 1.482-3 Methods to determine taxable income in connection with a transfer of tangible property | Tag: Accounting consistency, Accounting differences, Cost plus method, Example, Gross margin, Gross profit margin, Gross profit markup
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Related Case Law
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