Page 66 - Strategic Tax Planning for Global Commerce & Investment

Tax Benefits for U.S. Exporters

Generally, the CUP method could apply to standard,
identical and fungible commodities

Example:

# 1 - Comparable Sales of the Same Product

A US firm sells computer disks to both, uncontrolled distributors
and controlled distributors. The transactions to the distributors
are identical except for:
 Controlled sales price include delivery to
the uncontrolled distributor
 Uncontrolled sales are f.o.b. factory

Differences pertain only to transportation and insurance.
Differences in contractual terms for transportation and insurance
have a definite and reasonably ascertainable effect on price. The
differences are minor differences. The CUP method is the best
method after adjusting for the transportation and insurance
differences and provides the most direct and reliable measure of
an arm’s-length result.

# 2 – Effect of a Valuable Trademark

The facts are the same as in #1 above, except that the US firm
attaches its valuable trademark in controlled transactions, but
does not attach it to uncontrolled transactions. The trademark,
being valuable, has a material impact on price. The value of the
trademark cannot be reliable estimated.

In essence, the application of a valuable trademark destroys
comparability needed to use the CUP method, the CUP method

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