Profit Split Method

Profit Split Method is.

one of five types of methods for determining an arm's length price for tangible and intangible property. Transfer pricing method that allocates the combined operating income or loss from a transaction among the separate parties by determining the relative value of each party's contribution to such overall profits or loss. A profit (loss) split method allocates combined profit or loss from a business activity, including the controlled transactions, in a manner that shows the relative value of each taxpayer's contribution to the combined profit or loss. The three profit (loss) split methods are the residual allocation rule, capital employed allocation rule, and comparable profit-split method. Former U.S. Treasury Department Proposed Regulation (check if this Prop. Reg. is current here) §1.482-6.

See Transfer Pricing in the United States Encyclopedia of Law and Transfer Pricing in the International Encyclopedia of Law.