Ranger Company a U S taxpayer manufactures and sells

medical products #3480

Ranger Company, a U.S. taxpayer, manufactures and sells medical products for animals.
Ranger holds the patent on Z-meal, which it sells to horse ranchers in the United States. Ranger
Company licenses its Bolivian subsidiary, Yery SA, to manufacture and sell Z-meal in South
America. Through extensive product development and marketing, Yery has developed a South
American llama market for Z-meal, which it sells under the brand name Llameal. Yery's sales of
Llameal in Year 1 were $800,000, and its operating expenses related to these sales, excluding
royalties, were $600,000. The IRS has determined the following:Value of Yery's operating
assets used in the production of Z-meal……………..$300,000Fair market return on operating
assets…………………………………………..20% 10%Percentage of Ranger's worldwide sales attributabl
intangibles………………15%Percentage of Yery's sales attributable to its
intangibles…………………Required:Determine the amount that Ranger would charge as a license fee
to Yery in Year 1 under the residual profit split method.View Solution:
Ranger Company a U S taxpayer manufactures and sells medical products

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