Page 68 - Strategic Tax Planning for Global Commerce & Investment

Tax Benefits for U.S. Exporters

ate gross profit from the applicable resale
price. The gross margin is expressed as a
percentage of total revenue derived from

sales.
3. The resale price method measures the value
of functions performed
4. The resale price method is generally used in
the purchase or sale of tangible property
5. The resale price method assumes that the re-
seller has not added substantial value to the

tangible property by physically altering the
property before sale. Packaging, repackag-
ing, labeling and minor assembly does not
constitute physical alteration.
6. The resale price method is not ordinarily
used when the controlled entity uses its in-
tangible property to add substantial value to

the tangible property

Comparability Analysis and the Resale Price Method

1. The determination as to whether the resale
price method is the “best method” and pro-
vides a reliable measure of an arm’s-length
result is determined under the “best meth-

od” factors
2. Functional comparability is the most im-
portant factor under the resale price meth-
od, with risks borne and contractual terms
being the next important factors of the com-

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