Implied Discount rate - NABE

2011 Proposed Regulations - Example 9• Two cost sharing participants; one has a PCT contribution which is valued usingIncome Method• The discount rates for the cost sharing alternative is estimated at 15 percent andthat for the licensing alternative is estimated at 13 percent resulting in a $464 millionPCT• The Commissioner has additional data on discount rates for comparable companies• Based on available data, the Commissioner determines that an appropriate range for“implied discount rate” is 15 percent or 17 percent• The PCT values are calculated as $446 million and $ 501 million, with 17 percentand 15 percent discount rates, respectively• Since the taxpayer’s estimated PCT value lies between this range, it was deemedreasonable and no further adjustments issued18