Category Archives: Corporate Commercial

Alternative Dispute Resolution: Finalizing Mediation



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In a recent post we have previously discussed the practical aspects of mediation in Mongolia. Mediation is one of the better alternative dispute resolution methods for those who are seeking short-term and inexpensive way to settle a dispute. In this article we’ll explore the closing of the mediation process and aftermath.

The mediation process is generally considered more prompt, inexpensive, and procedurally simple than formal litigation. It allows the parties to focus on the underlying circumstances that contributed to the dispute, rather than on narrow legal issues. The mediation process does not focus on truth or fault. Questions of which party is right or wrong are generally less important than the issue of how the problem can be resolved. Disputing parties who are seeking vindication of their rights or a determination of fault will not likely be satisfied with the mediation process.

Nonetheless, if in the mediation process a resolution is reached between parties, a written settlement agreement must be executed. Such settlement agreement is binding for all parties of dispute and considered enforceable contract. As mentioned in our previous post mediation centers operate at courts of first instance (court-based mediation centers), and may operate at government authorities, NGOs and professional associations (other mediation centers). Settlement agreements executed by mediators of a court-based mediation center become a sort of court judgement, as judge of corresponding court issues a court decision confirming such settlement agreement. And if parties fail to voluntarily perform their obligation under settlement agreement, it shall be enforced same as court decision. On the other hand, while settlement agreements executed by mediators of other mediation center are also binding for parties of dispute, these are not enforced same as settlement agreements executed by mediator of court-based mediation center. If parties fail to voluntarily perform their obligations under such settlement agreement, parties have the right to pursue their claims in other forms (such as litigation or arbitration).

However, if in the mediation process parties could not reach any resolution, or parties did not actively seek any resolution, or for other reasons the mediation process could not further proceed, the mediation process shall be terminated. At this point parties of dispute may decide to resolve their dispute through litigation or arbitration.

Franchising in Mongolia: Intellectual Property is More than Trademarks



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In the first part of this series we have discussed about trademarks as part of franchise system. In this part we will discuss about other elements of intellectual property that may be utilized in franchise system.

Other critical element of intellectual property in franchise systems are copyrights. Pursuant to law copyright protects the fixation of the expression of an idea in a tangible form, whether written, verbal, graphical or other objective forms. Copyright exists in a variety of items commonly used by a franchise: training videos, marketing material, ads, websites, music, logos and software. There is significant value to the copyright-protected materials incorporated into a franchise system and, like trademarks, these elements are licensed by the franchisor to the franchisee for use in the franchised business. And, unlike trademarks, copyrights do not have to be registered in order to be protected.

Trade dress is what makes a franchise system unique and distinctive from others, including the overall visual look, feel and impression of a location. Some part of trade dress may be protected by copyrights.

Not all franchises involve trade secrets (i.e. confidential information), but it is typical to see franchise systems maintaining some aspects of their operations as strictly confidential and maintained as trade secrets. In Mongolia there is no law that regulates specifically trade secrets or business aspects of trade secrets. However pursuant to Law on Corporate secret, any corporate information, document, research, method, solution, project and etc. which holds economic value may be considered confidential corporate secret (trade secret) and may be protected from divulgence. In the context of the franchise arrangement, the need and desire to share information with franchisees competes with the legal necessity of limiting the distribution of true trade secret material. Reasonable steps to ensure the identification and protectability of trade secrets include: confidentiality or non-disclosure agreements and clauses; marking of claimed trade secret material, limiting the distribution to “need to know”, password protected computer systems and databases, and locks on cabinets and doors. In some cases, a franchisor’s trade secrets are not even divulged to the franchisee, such as the specific recipes or bulk ingredients required to create a quick-service restaurant chain’s signature sauces.

Patents are usually not included in franchise systems, but they can be. Patent registrations are intended to protect an inventor’s rights to specific inventions, such as a newly engineered product, medical device, drug or other innovation. Unless a franchise system has specifically developed its own equipment, it generally will not include any patents within its intellectual property.

It is very important for franchisor, as well as franchisee, to take the time to fully analyze and review any franchise agreement, disclosure document and respective attachments before signing them. While the above information serves as a general overview, as always, one should seek their own legal advice when reviewing a franchise agreement. Only then it is possible to obtain specific information and recommendations relevant to particular circumstances.

Establishing a Mongolian Franchise Business: Protect Your Intellectual Property



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In a recent blog post we discussed the franchise business model and it’s rapid growth in Mongolia. In a new three-part article series, we will dive deeper into franchise agreements in Mongolia and look at intellectual property, which is one of the most important aspects of a franchise system, and its importance.

Intellectual property law and business law have many areas that overlap. Franchising, in particular, is a unique business model, with the franchisor’s intellectual property at its core.

As such, intellectual property is one of the most important elements of any franchise. Within the franchise agreement, one of the core assets and rights that franchisor will be granting to franchisees will be a license permitting a franchisee to utilize their intellectual property and, in turn, franchisor is declaring to a franchisee that franchisor owns the intellectual property and will protect and defend it. So, it is important for franchisor to make sure that they actually own and can protect intellectual property that they are purportedly licensing to franchisees. Especially, when entering into a franchise agreement with franchisee, who will operate in another country.

These days most people are familiar with the term “intellectual property”, but not everyone understands the differences between various types of it. Intellectual property may include trademarks, copyrights, trade secrets, trade dress (i.e. the look, feel and distinctive elements of a franchise system, such as the interior design, layout and other visual aspects of a franchise location) and sometimes patents under which franchise businesses operate.

Trademarks are perhaps the most commonly recognized and well-known element of intellectual property. The Mongolia Law on Trademarks and Geographical Indications defines trademarks as expressions with distinction, which are used by legal entity or individual in order to distinguish their products or services from that of others. Trademarks can include business names, taglines, service names, logo designs and specific color or color combinations, etc. They are among the visual components of a franchise business.

Just because franchisor has used their trademark for many years it does not mean that trademark is legally protectable nor that they own it. First, franchisor needs to properly register their trademark with intellectual property authority. Secondly, if franchisor is entering into franchise agreement with franchisee, who will operate in another country, franchisor needs to register their trademark in the country where franchisee will operate as well. This way franchisor asserts their ownership of trademark and ensures protection of their trademark from other infringers (such as copycats and confusingly similar marks).

Mongolia’s Double Taxation Treaties



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Many countries have entered into tax treaties (also called double tax agreements, or DTAs) with other countries to avoid or mitigate double taxation.  Double taxation is the levying of tax by two or more jurisdictions on the same declared income, asset or financial transaction. Double liability is mitigated in a number of ways, for example:

  • the main taxing jurisdiction may exempt foreign-source income from tax,
  • the main taxing jurisdiction may exempt foreign-source income from tax if tax had been paid on it in another jurisdiction, or above some benchmark to not include tax haven jurisdictions,
  • the main taxing jurisdiction may tax the foreign-source income but give a credit for foreign jurisdiction taxes paid.

Another approach is for the jurisdictions affected to enter into a tax treaty which sets out rules to avoid double taxation. In the all over the world, over 3000 double taxation agreement (DTAs) are in effect.

Mongolia has entered into “The Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital” with other 25 jurisdictions as of 2017. Namely,

№ Country In force since
1 The People’s Republic of China Jan 01, 1993
2 The Republic of Korea Jan 01, 1993
3 The Federal Republic of Germany Jan 01, 1997
4 The Republic of India Jan 01, 1997
5 The Socialist Republic of Vietnam Jan 01, 1997
6 The Republic of Turkey Jan 01, 1997
7 The United Kingdom of Great Britain and Northern Ireland Jan 01, 1997
8 The Republic of Hungary Jan 01, 1997
9 Malaysia Jan 01, 1997
10 The Russian Federation Jan 01, 1998
11 The Republic of Indonesia Jan 01, 1998
12 The Republic of France Jan 01, 1999
13 Czech Republic Jan 01, 1999
14 The Kingdom of Belgium Jan 01, 1999
15 The Republic of Kazakhstan Jan 01, 2000
16 The Republic of Kyrgyz Jan 01, 2000
17 The Republic of Poland Jan 01, 2002
18 The Republic of Bulgaria Jan 01, 2002
19 The Swiss Confederation Jan 01, 2002
20 Ukraine Jan 01, 2003
21 Canada Jan 01, 2003
22 The Republic of Singapore Jan 01, 2005
23 The Democratic People’s Republic of Korea Jan 01, 2005
24 The Republic of Austria Jan 01, 2005
25 The Republic of Belarus May 28, 2001

Mongolia’s double tax treaties with United Arab Emirates and Kuwait were terminated from 1 January 2015 and 1 April 2015 respectively. Mongolia’s double tax treaties with Luxembourg and The Netherlands were terminated from 1 January 2014 due to failure to provide for the balance and equity rights of parties.

What You Need to Know About Registration of Foreign Pharmaceuticals in Mongolia



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Pharmaceuticals imported to be sold within Mongolia are required to be registered with the Ministry of Health prior to import. The law provides for an “Express” registration process, as well as a “Regular” track. Express registration includes a sub-track “A” and “B”.

To be eligible for Track A Express registration, a pharmaceutical product must already have approval from a national regulator from a country recognized internationally as having effective pharmaceutical review and control processes, and must be sold on the market in that country. Such recognized bodies include the FDA in the USA, The European Medicines Agency (EMA), European Free Trade Association (EFTA) and the Ministry of Health, Labour, and Welfare in Japan. Track A Express registration provides for formal registration of the product within 30 days of the filing of the application for registration.

Track B Express registration provides for formal registration within 60 days of the filing of the application for pharmaceuticals which have been previously approved by relevant authorities of states which are party to Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme–PIC/S.

If a pharmaceutical product does not meet the requirements for Express Track A or B, it will be required to proceed with a regular registration process. The regular approval process will take 3-5 months, however this time may be extended if required.

Applications for pharmaceutical approvals in Mongolia are submitted to the “Human Medicine Board” which will make a decision as to registration of the pharmaceutical for sale within Mongolia. Products approved under the Express process are granted approval for 3 years, while products registered via regular process will receive approval valid for 5 years, after which the registration is required to be renewed.

If you are seeking to import a medicine product to Mongolia, our Mongolian lawyers are able to assist with all required registration actions.

Franchising Proves Effective for Many Foreign Brands in Mongolia



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There are numerous tools a business may use to grow and expand, not just locally but also globally. Franchising is one of the many ways through which brand owners can rapidly grow their businesses and expand profits while delegating much of the cost and risk to a third party.

Franchising is commonly used in a wide variety of service oriented businesses, such as restaurants, hotels, health care, real estate and others, and is also used production and distribution of products. In Mongolia for example, over the last few years many global brands entered Mongolia via a franchise arraignment. Major brands to do so include Coca-Cola, Pepsi, Ramada Hotels, Shangri-La Hotels, Cosmopolitan, Re/max real estate, KFC, Burger King, Coffee Bean and Tea Leaf, Pizza Hut, Emart to name only a few. This strategy is chosen very deliberately due to the low risk of bankruptcy, and a higher chance of success for business to enter a franchising agreement. Research shows that an average consumer in the world spends one of every three dollars on product or service provided via a franchise model, demonstrating the economic significance of franchising.

In a franchise arrangement, the franchising party or Franchisor gives the Franchisee permission to not only use the Franchisor’s intellectual properties (trademarks, brand name, know how, goodwill, copyright, etc.) but also the Franchisor’s business operations system. In addition, Franchisees often benefit from the Franchisor’s distribution systems and marketing campaigns to sell the Franchisee’s products or services. In return, the Franchisee pays the Franchisor consistent fees and royalties, providing a steady stream of income for the Franchisor.

The franchise model provides several benefits for both the Franchisor and the Franchisee. Along with other benefits franchise agreements allow Franchisor companies to expand much more quickly than they could otherwise. A lack of funds and workers can cause a company to grow slowly. Through Franchising, a company invests very little capital or labor because the Franchisee supplies both. The Franchisor company experiences rapid growth with little financial risk.

The Franchisee also has numerous advantages that come from entering a franchising agreement. There is a low risk for the Franchisee due to the tried and tested formula. Franchisee gets the benefit of owning a proven business formula that has been tested and shown to work well in other locations. In addition, the Franchisee gets training and head office support from the Franchisor; this may be essential if the Franchisee is new to running a business and has no experience or business knowledge. And in a broader sense, global franchising is beneficial for the local government and economy as well, because jobs are created, and ownership remains local.

There are three major types of franchises – business format, product, and manufacturing – and each operates in a different way.

In business format franchises (which are the most common type), a company expands by supplying independent business owners with an established business, including use of its name and trademark. The Franchisor company generally assists the independent owners considerably in launching and running their businesses. In return, the business owners pay fees and royalties. In most cases, the Franchisee also buys supplies from the Franchisor. Fast food restaurants are good examples of this type of franchise. Prominent examples include KFC, Burger King, and Pizza Hut.

With product franchises, manufactures control how retail stores distribute their products. Through this kind of agreement, manufacturers allow retailers to distribute their products and to use the manufacturer’s name and trademarks. To obtain these rights, store owners must pay fees or buy a minimum amount of product for sale. In Mongolia there are several clothing retail stores that utilize this type of franchise, for example, United colors of Benetton stores, and Mango stores.

Through manufacturing franchises, a Franchisor grants a manufacturer the right to produce and sell products using its name and trademark. This type of franchise is common among food and beverage companies. For example, soft drink bottlers often obtain Franchise rights from soft drink companies to produce, bottle, and distribute soft drinks. For example, MCS Coca-Cola LLC obtained Franchise rights to produce, bottle and distribute soft drinks of the Coca-Cola company in Mongolia.

There are four basic types of franchise agreements: single-unit, multi-unit, area development and master franchising agreements.

A single-unit franchise agreement is the most common and is simply where a Franchisor grants a Franchisee rights to open and operate one single Franchise unit. In Mongolia, explicit examples are Caffé Bene, a coffeehouse chain, or Re/max, a real estate agency. All single units of these chains use the same trademark and same utilize the business operations system of the Franchisor. However, every single unit in Mongolia is owned by a different local company.

A multi-unit franchise agreement is where a Franchisor grants a Franchisee rights to open more than one franchise unit. For example, Tavan Bogd Foods LLC has multi-unit franchise rights to operate KFC restaurants in Mongolia, and Max Center LLC has multi-unit franchise rights to operate Burger King restaurants.

An area development agreement allows a Franchisee the right to open multiple units over an agreed amount of time within a specified geographic location and/or to own rights to their specific territory and earn money on each franchise sold in their territory through sharing of the franchise fee and ongoing royalties.

A master franchise agreement, also referred to as sub-franchising, gives a Franchisee the same rights as an area development agreement but also gives that Franchisee rights to establish franchises arrangements with other individuals or entities within the specified territory. A Master Franchisee assumes many of the tasks and obligations of the Franchisor such as training and support and receives a portion of the franchise fee and royalties. While technically there are significant differences there are times that master franchising and area development are used interchangeably.

The regulation of franchising varies country to country. While some countries have adopted separate franchising laws, many countries do not have a separate law that regulates franchising in its entirety. In most countries franchising is regulated in their commercial laws, commercial codes or civil codes, and in some countries it falls under regulation of several laws. In Mongolia franchise arrangements are regulated via Articles 333 – 338 of the Civil Code. The Civil Code provides the definition of a Franchise Agreement, and outlines the legal obligations and liabilities of the parties, terms of agreement, and non-competition terms. Intellectual property related aspects of a franchise agreement shall be regulated by relevant intellectual property laws.

It seems clear that franchising model in Mongolia is poised to continue to grow, as several global brands have announced their opening in Mongolia in the near future. Of course, prior to any franchise arrangement in Mongolia, a foreign business should seek out qualified advice from their Mongolian lawyer.

Requirements for Offering Tax Consulting Services in Mongolia



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Some activities must be conducted under a specialized license in accordance with Mongolian law. One of those activities is specialized tax consulting service. Tax consulting service is allowed to be conducted by a legal entity with a license granted by the appropriate government agency, similar to auditing. The Law on specialized tax consulting was adopted on December 27, 2012 and is the primary legislation to regulate this service.

According to the law, an authorized tax legal entity must satisfy a number of requirements, such as having a physical workplace, equipment and software necessary for the conduct of the required activities; having handbooks or manuals and methodology to be used in its operations; having archive for storage of work documents of consulting services; and ensuring confidentiality of a client information and information security.

In addition, there are specific human resources requirements. An authorized tax consulting company must have 3 and more specialized tax consultants and its founder must be a specialized tax consultant. License for specialized tax consultant is issued for 3 years term.

The specialized tax consulting service aims to provide a client with an opportunity to perform its duties to pay taxes and protect its rights and legal interests. The law stipulates that the tax consulting service includes following activities:

  • to provide advice on legislation on taxation and professional assistance regarding its implementation and promote;
  • to make tax estimation and adjustment, review primary and accounting documents, register tax influence and develop tax reports in accordance with approved template;
  • to communicate with taxation office and other relevant persons on behalf of a client.

As we mentioned in our earlier post, an auditing legal entity may carry out the auditing or review of financial statements and provide relevant financial services to the client. In addition, an auditing legal entity can engage in specialized tax consulting service after acquiring relevant license. If auditing legal entity provides the tax consulting service on the bases of additional license, it is not required to use a proper name which includes abbreviated letter of “STC” (Specialized tax consultant”) as an ordinary authorized tax legal entity does.

If a business offers tax consulting services without the required license, the company and personnel are subject to legal penalty.  A person may be fined for three hundred thousand tugrugs and a legal person is fined for three million tugrugs.

Investing in a Mongolia Company: Common vs Preferred Shares



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In general, purpose of investment is for one to gain profits and raise capital by acquiring certain assets, such as real estate, shares, bonds and so on, which are projected to rise in value. However, the significance of investment, particularly foreign investment is that it lets the investor not only raise its own capital, but it also becomes a tool for economic growth in Mongolia or any country. In this article we will take a look at a shareholder’s practical options as regards ownership of shares in a Mongolia company.

As provided in the Law of Mongolia on Securities Markets, a share evidences the investment of a shareholder in a company, gives its holder the right to vote at shareholders meetings, to receive dividends and to receive a proportionate share of proceeds from the sale of the company’s assets remaining following its liquidation. Shares are classified into common or preferred shares. There are several differences between the two, with each having it’s own pros and cons.

Most companies issue common shares, and similarly most investors acquire common shares. Common shares may benefit shareholders through appreciation and through dividends. Common shares also come with voting rights, giving shareholders more control over the business. In addition, common shares come with pre-emptive rights, ensuring that existing shareholders have a right to buy new shares and maintain their original percentage of ownership when the company issues new shares. A Common shareholder is entitled to following:

  1. Receive dividends: depending on company’s profitability and board of directors’ decision whether to distribute the profit, shareholder is entitled to receive dividends. Dividends may be paid in cash, as well as in form of assets and/or securities.
  2. Be involved in the management of the company by voting: shareholder is entitled to participate in shareholders meetings and vote regarding all issues proposed at such meetings. One common share comes with one voting right.
  3. Shareholder is entitled to receive and obtain all and any information regarding the company’s activities at any time.
  4. Receive a share of proceeds from the sale of the company`s remaining assets following liquidation of the company: following liquidation of the company and payment of all debts to creditors, shareholder is entitled to receive a share of proceeds (if any) from the sale of the company’s remaining assets.

In contrast, preferred shares in Mongolia, as in other countries, take priority over common shares, when dividends are distributed, as well as when the company is liquidated and pays its lenders, preferred shareholders receive payment before common shareholders. However, preferred shares typically do not offer voting rights in the company and have set payment criteria, a dividend that is paid out regularly. Usually preferred shares are issued when privatizing a state property or if a private company wants to attract additional funding (investment) without changing company’s control package. Preferred shareholder is entitled to following:

  1. Receive dividends before common shareholders: dividends are paid out to preferred shareholders before common share dividends are issued.
  2. Receive dividends regularly: while for common shareholder dividends are paid out only if company is profitable and board of directors decides to distribute profit, for preferred shareholder dividends are paid out regularly regardless of circumstances. Even if the company was not profitable and could not pay dividends, the payment is accumulated, and two-year dividend should be paid the following year.
  3. Receive a share of proceeds from the sale of the company`s remaining assets following liquidation of the company first: if the company is liquidating, shareholder is entitled to be paid from company assets first (before common shareholders).
  4. If provided in company charter, preferred shares may be converted into common shares.

Preferred shares are an optimal alternative for risk-averse equity investors. Preferred shares are typically less volatile than common shares and offer investors a steadier flow of dividends. Also, preferred shares are usually callable; the issuer of shares can redeem them at any time, providing investors with more options than common shares.

So, if you are thinking about buying shares in a Mongolian company, be sure to look into it more closely. There might be more options than just buying common shares.

What Are The Audit Requirements for a Foreign Invested Company in Mongolia?



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The National Audit Office of Mongolia has opened up public discussions on the Audit Law which was last amended in 2015 and effective from January 1, 2016. The working group of Audit law has been receiving suggestions from the public online and organizing a regular series of public discussions on changes to the current Audit Law.

On December 25 2017, a public discussion was held for independent legal auditors. There are now over 50 international and local audit companies admitted conducting the audit services in Mongolia.

Mongolia has some unique regulations regarding required corporate audits. According to the law, a particular audit firm is not allowed to provide auditing services to a certain client company for more than 5 consecutive years. Furthermore, an audit firm which had provided 5 consecutive years audit service to a certain client company may not provide auditing services to that company for at least 3 consecutive years. These requirements are designed to prevent arrangements between clients and audit firms to carefully disguise potentially non-compliant financial practices at the client company.

Under the current Audit Law, the following business entities or organizations must have mandatory auditing of financial statements:

  • business entities or organizations following the International Financial Reporting Standards;
  • business entities or organizations issuing consolidated financial statements;
  • business entities or organizations under a reorganization or liquidation process or selling all their assets through auction;
  • any foreign invested business entities or organizations;
  • any kind of financial fund; and
  • any other business entities or organizations which may be required to have mandatory auditing of their financial statements under the law and international treaties which Mongolia is a party.

Most business entities or organizations are required to have their financial statements audited by the April 30 of the following financial year. As for banks, annual final financial statements are due within March 31 of the following financial year. As for joint stock company, financial statements are required at least 2 weeks prior to any shareholders’ meeting in which it is intended to discuss financial statements of the reporting period.

For evading performance of obligations specified in law having its financial statements audited, or failure to have audited within above mentioned period, an individual is fined by amount equal to MNT 100,000 and a legal entity is fined by amount equal with MNT 1,000,000, in addition to compensate the damages occurred in accordance with Law on Infringement in Mongolia.

2018 Brings Changes to Personal and Corporate Taxes in Mongolia.



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With the beginning of 2018 several new tax regulations are coming into force. In 2017 the Parliament of Mongolia has passed number of amendments to laws. In this article we will highlight more relevant new tax regulations, which are coming into force from January 1st of 2018.

Increase of personal income (salary) tax and social insurance fee

On April 14th, 2017 the Parliament of Mongolia passed several amendments to Law on Personal Income Tax, Law on Social insurance and relevant accompanying laws. Pursuant to amendments to Law on Personal Income Tax, beginning from January 1st, 2018 personal income (salary) tax shall be incremental. Individuals shall pay starting from 10 percent and maximum up to 25 percent income tax depending on their annual income. Non-residents, who are employed in Mongolia, now shall pay 20 percent income tax regardless of their income. Before non-residents paid 10 percent income tax.

Pursuant to amendments to Law on Social Insurance, the rate for pension insurance fee shall gradually increase over the next 3 years. In 2018 employees and employers shall each pay 8 percent, in 2019 – 8.5 percent, from 2020 – 9.5 percent of pension insurance fee. Individuals, who are self-employed and/or pay pension insurance fee on voluntary basis, shall pay 11 percent of pension fee in 2018, in 2019 – 11.5 percent, from 2020 – 12.5 percent.

Tax on transfer of land possession and land use rights

Pursuant to amendments to Law on Personal Income Tax from November 10th, 2017, now any free of charge transfer of land possession and land use rights (whether if transfer is under gift contract, or transfer between family members) are taxable. Before only purchase-sale of land possession and land use rights were taxable. Under new regulation any transfer of land right (whether paid or free of charge) is subject to 10 percent tax.

Tax on transfer of land rights, exploration and mining licenses

On November 10th, 2017, the legislators passed an amendment to Law on Corporate Income Tax, pursuant to which transfer of land rights, exploration and mining licenses via transfer of owner company’s shares is now taxable. In other words, when a shareholder transfers his/her shares of company that holds land rights (land possession or land use rights), exploration or mining licenses to third party, such transfer is subject to 30 percent income tax. In compliance with amendments to Law on Corporate Income Tax, The Minister of Finances has published relevant methodologies, forms and required documents necessary to determine and calculate the taxable income amount from such transfers.