This discussion presents a simplified illustration of the issues with respect to the unspecified method applied in Medtronic III in contrast to the IRS' extreme CPM approach and a traditional RPSM approach based on sound financial economics.

Topics: US Transfer Pricing Residual Profit Split Method Unspecified Method US Internal Revenue Service Tax Policy Medtronic Section 482 TNMM/CPM Tax Controversy Intangibles

Use of the CPM/TNMM to determine royalty rates for valuable intangibles in transfer pricing is incompatible with basic financial economics.

Topics: DEMPE OECD Guidelines US Internal Revenue Service Tax Policy TNMM/CPM Royalty Rates Intangibles