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unavailable, the arm's-length consideration is determined by
evaluating various facts and circumstances. Sec.
1.482-2(d)(2)(iii), Income Tax Regs.
The relevant factors identified in section 1.482-2(d)(2)(iii),
Income Tax Regs., for determining the amount of an arm's-length
consideration where an adequately similar transaction is absent
are:8
8 Sec. 1.482-2(d), Income Tax Regs., was effectively
superseded by sec. 1.482-4T, Temporary Income Tax Regs., 58 Fed.
Reg. 5263, 5287 (Jan. 21, 1993), generally effective for taxable
years beginning after April 21, 1993.
Additionally, sec. 482 was amended, for tax years beginning
after Dec. 31, 1986, by the addition of the following sentence at
the end thereof: "In the case of any transfer (or license) of
intangible property (within the meaning of section 936(h)(3)(B)),
the income with respect to such transfer or license shall be
commensurate with the income attributable to the intangible."
Tax Reform Act of 1986, Pub. L. 99-514, sec. 1231(e)(1), 100
Stat. 2085, 2562-2563. The effect of the amendment to sec. 482
is that we may consider the actual profits realized by the
transferee through its use of the intangible property. H. Rept.
99-426, 425 (1985), 1986-3 C.B. (Vol. 2) 425 ("The committee does
not intend, however, that the inquiry as to the appropriate
compensation for the intangible be limited to the question of
whether it was appropriate considering only the facts in
existence at the time of the transfer. The committee intends
that consideration also be given the actual profit experience
realized as a consequence of the transfer.")
The statutory amendment to sec. 482 is apparently in
conflict with sec. 1.482-2(d)(2)(iii)(g), Income Tax Regs., which
provides that only the prospective profits to be realized by the
transferee through its use of the property may be considered in
the determination of the amount of an arm's-length consideration
(i.e., without consideration of subsequent actual profits). See
Bausch & Lomb, Inc. v. Commissioner, 92 T.C. 525, 601 (1989)
("Unlike both respondent and petitioners' experts, we find little
relevance in B&L Ireland's actual results of operations during
1981 and 1982. Such information would not have been available in
1980 to a potential licensee negotiating a license agreement
which was entered on January 1, 1981."), affd. 933 F.2d 1084 (2d
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