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Transfer pricing regulations under the Internal Revenue Code. Full searchable text covering allocation of income, pricing methods, and compliance requirements.
Section 482 of the Internal Revenue Code authorizes the IRS to allocate income, deductions, and other items between related parties to clearly reflect income. These Treasury Regulations provide detailed guidance on applying the arm's length standard and selecting appropriate transfer pricing methods.
In general—(1) Purpose and scope. The purpose of section 482 is to ensure that taxpayers clearly reflect income attributable to controlled transactions and to prevent the avoidance of taxes with...
Loans or advances—(1) Interest on bona fide indebtedness—(i) In general. Where one member of a group of controlled entities makes a loan or advance directly or indirectly to, or otherwise becomes a...
In general. The arm's length amount charged in a controlled transfer of tangible property must be determined under one of the six methods listed in this paragraph (a). Each of the methods must be...
In general. The arm's length amount charged in a controlled transfer of intangible property must be determined under one of the four methods listed in this paragraph (a). Each of the methods must be...
In general. The comparable profits method evaluates whether the amount charged in a controlled transaction is arm's length based on objective measures of profitability (profit level indicators)...
In general. The profit split method evaluates whether the allocation of the combined operating profit or loss attributable to one or more controlled transactions is arm's length by reference to the...
In general. The arm's length amount charged in a controlled transaction reasonably anticipated to contribute to developing intangibles pursuant to a cost sharing arrangement (CSA), as described in...
Introduction. In accordance with the best method rule of § 1.482-1(c), a method may be applied in a particular case only if the comparability, quality of data, and reliability of assumptions under...
In general. The arm's length amount charged in a controlled services transaction must be determined under one of the methods provided for in this section. Each method must be applied in accordance...
The Treasury Regulations under Section 482 provide the most detailed guidance available on applying the arm's length standard in the United States. These regulations cover:
Common questions about US Treasury Regulations under Section 482
Section 482 authorizes the IRS to allocate income, deductions, credits, and other tax items among two or more organizations, trades, or businesses owned or controlled by the same interests. The purpose is to prevent tax evasion and clearly reflect income by ensuring controlled transactions are priced at arm's length.
Under Treasury Regulations § 1.482-1(b), the arm's length standard requires that controlled transactions produce results consistent with those that would have been realized if uncontrolled taxpayers had engaged in the same transaction under the same circumstances. This is the fundamental principle underlying all Section 482 transfer pricing rules.
The Treasury Regulations recognize several transfer pricing methods: (1) Comparable Uncontrolled Price (CUP) method under § 1.482-3(b), (2) Resale Price method under § 1.482-3(c), (3) Cost Plus method under § 1.482-3(d), (4) Comparable Profits Method (CPM) under § 1.482-5, and (5) Profit Split method under § 1.482-6. The "best method rule" in § 1.482-1(c) requires selecting the method that provides the most reliable measure of an arm's length result.
The best method rule under § 1.482-1(c) requires that the arm's length result be determined using the method that provides the most reliable measure of an arm's length result under the facts and circumstances. Reliability depends on the degree of comparability between controlled and uncontrolled transactions and the quality of the data and assumptions used.
Under § 1.482-7, a cost sharing arrangement (CSA) is an agreement between controlled participants to share the costs and risks of developing intangibles in proportion to their reasonably anticipated benefits from exploitation of those intangibles. Participants must make platform contribution payments for pre-existing resources and capabilities made available to the CSA.
Treasury Regulations § 1.482-9 provides specific rules for controlled services transactions. Services must be priced at arm's length, with methods including the services cost method (SCM), comparable uncontrolled services price (CUSP) method, gross services margin method, cost of services plus method, comparable profits method, and profit split method.
ArmsLength AI helps you apply Section 482 principles in practice with AI-powered benchmarking studies and transfer pricing documentation.
Source: Electronic Code of Federal Regulations (eCFR) •View on eCFR.gov