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

Question

Quizplus · Accepted Answer

The resale price method is acceptable when the related party is merely a distributor of finished goods. This method involves setting the transfer price equal to the resale price less an appropriate markup for the distributor's operating costs and profit. This ensures that the distributor earns a reasonable profit based on its role in the value chain.

Under What Condition Does the IRS Consider the Resale Price