Appraisal Economics has performed a transfer pricing analysis related to the transfer of intellectual property (IP) assets to an offshore holding company set up by a U.S.-based global media company. The transfer was part of a restructuring transaction designed to broaden the company’s product offerings of print and digital media and expand licensing opportunities for the company’s trademarks and logo. Section 482 of the Internal Revenue Code requires that royalty payments between related parties in different countries be set at arm’s length terms. This is intended to prevent opportunistically recognizing revenue, expenses, and profits in a way that results in taxable income being improperly shifted to lower-tax jurisdictions and evading U.S. taxes. The transaction was also required to comply with Section 367(d) of the Internal Revenue Code, which governs certain terms of cross-border reorganizations. Appraisal Economics performed a detailed analysis to determine the arm’s length royalties between the entities and determined the business enterprise value of each entity to support company management’s efforts to demonstrate compliance with the provisions of the relevant regulations.
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