Understanding the Transfer Price of a Digital Audio Recording Device
Definition & Meaning
The transfer price of a digital audio recording device refers to the value assigned to that device during a transfer between parties. This price varies based on whether the product is imported or domestic:
- For imported products, it is the actual entered value at U.S. Customs, excluding freight, insurance, and applicable duties.
- For domestic products, it is the manufacturer's transfer price, excluding any direct sales or excise taxes related to the sale.
- When the transferor and transferee are related entities, the price must not be less than a reasonable arms-length price, as defined by regulations.
Legal Use & context
The term "transfer price" is commonly used in tax law and international trade. It is relevant in situations involving:
- Valuation of goods for customs purposes.
- Tax implications related to transactions between related entities.
- Transfer pricing regulations that ensure fair market value is applied to transactions to avoid tax evasion.
Users can manage related forms and procedures through resources like US Legal Forms, which offers templates drafted by attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company imports a digital audio recording device valued at $500 at U.S. Customs. The transfer price for this device is $500, excluding any additional costs like shipping.
Example 2: A domestic manufacturer sells a digital audio recording device to a related company for $300. This price must reflect an arms-length price, ensuring it is comparable to market rates. (hypothetical example)