Rev. Rul. 65-109

Section 4.012 of Revenue Procedure 64-54, C.B. 1964-2, 1008, provides, in part, that allocations to reflect charges or royalties for the use of intangible assets belonging to the United States controlling taxpayer will not be made to the extent that the intangibles are used by a controlled foreign entity in the manufacture of products or the sale of products manufactured by the foreign entity or other foreign person.

Held , in applying section 4.012 of Revenue Procedure 64-54, an allocation under section 482 of the Internal Revenue Code of 1954 to reflect charges or royalties for the use of intangible assets belonging to the United States controlling taxpayer may be made in those situations where the right to use such intangibles has been relicensed by its controlled foreign entity for a consideration, whether or not the relicensing was to another controlled foreign entity which used the intangibles in the manufacture of products or the sale of products manufactured by the foreign entity or other foreign person.

Section 4.012 of Revenue Procedure 64-54 is hereby clarified.