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results consistent with an arm's length result, and to
clarify that under the best method rule, the provisions
of � 1.482-7 set forth the applicable method with
respect to qualified cost sharing arrangements.
Id. at 49000. Sections 1.482-1 and 1.482-7, Income Tax Regs.,
were modified as follows:
SEC. 1.482-1. Allocation of Income and Deductions Among
Taxpayers.
* * * * * * *
(2) * * * Section 1.482-7 provides the specific method
to be used to evaluate whether a qualified cost sharing
arrangement produces results consistent with an arm’s
length result.
* * * * * * *
SEC. 1.482-7. Sharing of Costs.
* * * * * * *
(3) Coordination with � 1.482-1.--A qualified cost
sharing arrangement produces results that are
consistent with an arm's length result within the
meaning of � 1.482-1(b)(1) if, and only if, each
controlled participant's share of the costs (as
determined under paragraph (d) of this section) of
intangible development under the qualified cost sharing
arrangement equals its share of reasonably anticipated
benefits attributable to such development (as required
by paragraph (a)(2) of this section) and all other
requirements of this section are satisfied.
* * * * * * *
(2) Stock-based compensation.--(i)* * * a controlled
participant's operating expenses include all costs
attributable to compensation, including stock-based
compensation. * * * stock-based compensation means any
compensation provided by a controlled participant to an
employee * * * in the form of equity instruments,
options to acquire stock (stock options), or rights
with respect to (or determined by reference to) equity
instruments or stock options, including but not limited
to property to which section 83 applies and stock
options to which section 421 applies, regardless of
whether ultimately settled in the form of cash, stock,
or other property.
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