Page 56 - Strategic Tax Planning for Global Commerce & Investment

Tax Benefits for U.S. Exporters

of the services and; in the case of intangible property, the form of
transaction (i.e. licensing or sale), the type of property (i.e.
patent, trademark or knowhow), the duration and degree of
protection and, the anticipated benefits from the use of the
property.

Functional Analysis

The functional analysis determines the functions performed and
the associated resources employed in these functions,
ascertaining for both, controlled transactions and uncontrolled
transactions.

Functional analysis identifies and compares economically
significant activities. Thus, activities that are not economically
significant are not taken into account in the analysis.

Functional analysis focuses in two areas:

1. The functions realized by the entities
2. The resources utilized which are associated
with the functions or activities:
 Research and development

 Product design and engineering
 Product fabrication, extraction and as-
sembly
 Purchasing and materials management
 Marketing and distribution functions, in-
cluding inventory management, warran-

ty administration and advertising
activities
 Transportation and warehousing

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