Under what condition does the IRS consider the resale price method acceptable as a transfer price?

Question

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The IRS generally considers the resale price method acceptable when the related party is primarily a sales subsidiary. Under this method, the transfer price is based on the resale price of the goods or services sold by the related party to unrelated customers, less an appropriate gross profit margin. This method is considered appropriate when the related party's function is essentially that of a distributor or reseller, rather than a manufacturer or producer.

Under What Condition Does the IRS Consider the Resale Price