Example. Foreign Parent (FP) is a foreign corporation engaged in the extraction of a natural resource. FP has a U.S. subsidiary (USS) to which FP sells supplies of this resource for sale in the United States. FP enters into a cost sharing arrangement with USS to develop a new machine to extract the natural resource. The machine uses a new extraction process that will be patented in the United States and in other countries. The cost sharing arrangement provides that USS will receive the rights to use the machine in the extraction of the natural resource in the United States, and FP will receive the rights in the rest of the world. This resource does not, however, exist in the United States. Despite the fact that USS has received the right to use this process in the United States, USS is not a qualified participant because it will not derive a benefit from the use of the intangible developed under the cost sharing arrangement.
Example.
Example.
Sales
[In millions of dollars]
Year | USS | FP |
1997 | 5 | 10 |
1998 | 20 | 20 |
1999 | 30 | 30 |
2000 | 40 | 40 |
2001 | 40 | 40 |
2002 | 40 | 40 |
2003 | 40 | 40 |
2004 | 20 | 20 |
2005 | 10 | 10 |
2006 | 5 | 5 |
Sales
[In millions of dollars]
Year | USS | FP |
1997 | 0 | 17 |
1998 | 17 | 35 |
1999 | 25 | 41 |
2000 | 38 | 41 |
2001 | 39 | 41 |
Sales
[In millions of dollars]
Year | USS | FP |
1997 | 0 | 17 |
1998 | 17 | 35 |
1999 | 25 | 44 |
2000 | 34 | 54 |
2001 | 36 | 55 |
Sales
[In millions of dollars]
Year | USS | FP |
2002 | 36 | 55 |
2003 | 36 | 55 |
2004 | 18 | 28 |
2005 | 9 | 14 |
2006 | 4.5 | 7 |
[All amounts stated in X's]
A | B | C | D | |
Payments | [LESS THAN]40[GREATER THAN] | [LESS THAN]21[GREATER THAN] | [LESS THAN]37.5[GREATER THAN] | [LESS THAN]30[GREATER THAN] |
Receipts | 48 | 34 | 22.5 | 24 |
Final | 8 | 13 | [LESS THAN]15[GREATER THAN] | [LESS THAN]6[GREATER THAN] |
26 C.F.R. §1.482-7A