Example.
(1) Attributable to an increase in gross income because of an increase in royalty payments | $9,000,000 |
(2) Attributable to an increase in sales proceeds due to a decrease in the profit margin of a related buyer | 6,000,000 |
(3) Because of a setoff under § 1.482-1(g)(4) | (5,000,000) |
Total section 482 adjustments | 10,000,000 |
(1) Attributable to an increase in gross income because of an increase in royalty payments | $2,000,000 |
(2) Attributable to an increase in sales proceeds due to a decrease in the profit margin of a related buyer | 2,500,000 |
(3) Attributable to a decrease in the cost of goods sold because of a decrease in the cost plus mark-up of a related seller | 2,000,000 |
Total section 482 adjustments | 6,500,000 |
(1) Attributable to an increase in gross income because of an increase in royalty payments | $11,000,000 |
(2) Attributable to an increase in sales proceeds due to a decrease in the profit margin of a related buyer | 2,000,000 |
(3) Because of a setoff under § 1.482-1(g)(4) | (9,000,000) |
Total section 482 adjustments | 4,000,000 |
(1) Attributable to Member A | $1,500,000 |
(2) Attributable to Member B | 1,000,000 |
(3) Attributable to Member C | 2,000,000 |
Total section 482 adjustments | 4,500,000 |
(1) Attributable to Member A | $1,500,000 |
(2) Attributable to Member B | 3,000,000 |
(3) Attributable to Member C | 2,500,000 |
Total section 482 adjustments | 7,000,000 |
(1) Attributable to Member A | $2,000,000 |
(2) Attributable to Member B | 1,000,000 |
(3) Attributable to Member C | 1,500,000 |
Total section 482 adjustments | 4,500,000 |
(1) Attributable to an increase in gross income because of an increase in royalty payments | $9,000,000 |
(2) Not a 200 percent or 400 percent adjustment | 2,000,000 |
(3) Attributable to a decrease in the cost of goods sold because of a decrease in the cost plus mark-up of a related seller | 9,000,000 |
Total section 482 adjustments | 20,000,000 |
(1) Attributable to an increase in gross income because of an increase in royalty payments | $9,000,000 |
(2) Attributable to an adjustment that is 200 percent or more of the correct section 482 price | 2,000,000 |
(3) Attributable to a decrease in the cost of goods sold because of a decrease in the cost plus mark-up of a related seller | 9,000,000 |
Total section 482 adjustments | 20,000,000 |
Example. The Internal Revenue Service makes a section 482 adjustment of six million dollars in taxable year 1, no portion of which is excluded under paragraph (d) of this section. The taxpayer's income tax return for year 1 reported a loss of three million dollars, which was carried to taxpayer's year 2 income tax return and used to reduce income taxes otherwise due with respect to year 2. A determination is made that the six million dollar allocation constitutes a substantial valuation misstatement, and a penalty is imposed on the underpayment of tax in year 1 attributable to the substantial valuation misstatement and on the underpayment of tax in year 2 attributable to the disallowance of the net operating loss in year 2. For purposes of determining whether there is a substantial or gross valuation misstatement for year 2, the three million dollar reduction of the net operating loss will not be added to any section 482 adjustments made with respect to year 2.
(1) Attributable to an adjustment that is 400 percent or more of the correct section 482 arm's length result | $2,000,000 |
(2) Not a 200 or 400 percent adjustment | 2,500,000 |
Total | 4,500,000 |
(1) Attributable to an adjustment that is 400 percent or more of the correct section 482 arm's length result | $6,000,000 |
(2) Not a 200 or 400 percent adjustment | 15,000,000 |
Total | 21,000,000 |
26 C.F.R. §1.6662-6