(b) Case Law 18
(c) Three Scenarios 18
(d) How Taxpayers Would
Structure Licensing
Arrangements 19
(e) Additional Licensing
Scenarios 19
29.13 Life-Cycle Business Analysis 19
(a) Life-Cycle Analysis Under
IRS Audit 20
(b) Declining Businesses and
the CRT Example 20
29.14 Overreliance on External Data 20
29.15 Dependence on SIC Code
Analysis 21
(a) SIC Issues 21
(b) Difficulties Caused by
the Comparable Profits
Method 21
(c) Jingoism Can Shift Transfer
Pricing Results 22
29.16 Selection of the Best Transfer
Pricing Method 22
29.17 “Comparison of Functions
Employed” Methodology 22
(a) Begin with Composite
Return on Investment 23
(b) Severing Transfer Pricing
Transactions from Non-
transfer Transactions 24
(c) Recombining the Transfer
Pricing Transactions 25
(d) Making Economic
Adjustments 25
29.18 Using Total Operating
Expenses 25
(a) Gross Operating Expense
Computations 25
(b) Severing Nontransfer
Pricing Transactions from
Transfer Pricing
Transactions 26
(c) Recombining the Transfer
Pricing Transactions 26
(d) Economic Analysis 26
29.19 Tax Malpractice Attorney as
Your Ally 26
29.20 Developing the Standard Initial
Transfer Pricing Information
Document Request 27
(a) Initial Transfer Pricing
Information Document
Request 27
(i) Profit and Loss
Statement 27
(ii) Related Party 27
(iii) Related-Party Group 28
(iv) U.S.-Connected
Products or Services 28
(v) Application of “U.S.-
Connected Products or
Services 28
(vi) Industry Segment 28
(vii) Gross Revenues of an
Industry Segment 28
(viii) Worldwide Gross
Revenues 29
(ix) Operating Profit of the
Industry Segment 29
(x) Worldwide Operating
Profit 29
(xi) Operating Expenses of
the Industry Segment 29
(xii) Worldwide Operating
Expenses 29
(xiii) Return on Assets 30
(xiv) Identifiable Assets of
an Industry Segment 30
(b) Existing Records 30
(c) Industry Segments 31
(i) Preparation of
Documents and the
Supplying of
Documents 31
(ii) Selecting Industrial
Segments 31
(iii) Complying and
Supplying Profit and
Loss Statements and
Balance Sheets 31
(iv) Taxpayers Are to
Complete the
Following 32
29.21 Transfer Pricing Information
Document Request for
Acquisitions 33
(a) Introduction 33
(b) Background 34
(c) Objectives 34
(d) Examination of the
Notification Form 34
(i) Person Filing the
Form 35
(ii) Parties and the
Transaction 35
(iii) Specific Items Affecting
the Transaction 35
(iv) Specific Items Relied
Upon and Filed 36
(v) Detailed Information
Reflecting the North
American Industry
Classification System
(NAICS)—United
States, 1997 36
(vi) Shareholders,
Holdings, and Entities 3729 • 2 TRANSFER PRICING FOR INTERCOMPANY TRANSACTIONS