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New Final Regs on Use of Differential Income Stream in Evaluating Cost-Sharing Arrangements

by Sutherland Asbill Brennan LLP - Washington Office

September 4, 2013

Previously published on September 3, 2013

On August 26, 2013, the United States Treasury Department issued new final regulations under Internal Revenue Code (IRC) Section 482. The new regulations provide guidance on the “income method” for determining taxable income in connection with cost-sharing arrangements (CSAs) entered into among members of a controlled group for the joint development of intangibles. Specifically, the regulations provide guidance on measuring the proper arm’s-length price of buying into a CSA by calculating the present value of the “differential income stream,” i.e., the incremental income projected to result from cost-sharing versus licensing.


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