This article offers practical guidance regarding the application of the comparable uncontrolled transactions method (CUTM) of valuing intangible property transfers between related parties. The article discusses the comparability requirements under U.S. law and the OECD guidelines, including an examination of the methods available for evaluating the profit potential of intangibles under the basic arm’s length return method (BALRM). This examination includes an illustrative calculation of the BALRM’s application. The article goes on to look at the comparability of circumstances of intangible transfers and the selection of comparables relevant to the CUTM. The article concludes with a review of the available databases for identifying comparable licensing agreements and some strategic recommendations regarding use of multiple sources to anticipate the identification of comparables by tax authorities.
Authors bio: By Hareesh Dhawale, George Carlson, and Niels Melius, Deloitte Tax LLP
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