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1.482-1(a)(5), Income Tax Regs.
The regulations provide:
Where one member of a group of controlled entities
performs marketing, managerial, administrative,
technical, or other services for the benefit of, or on
behalf of another member of the group without charge or
at a charge which is not equal to an arm’s-length
charge * * * , the district director may make
appropriate allocations to reflect an arm’s-length
charge for such services. * * * [Sec. 1.482-2(b)(1),
Income Tax Regs.]
The regulations provide a "benefit test", stating that
"Allocations may be made to reflect arm’s length charges with
respect to services undertaken for the joint benefit of the
members of a group of controlled entities, as well as with
respect to services performed by one member of the group
exclusively for the benefit of another member of the group."
Sec. 1.482-2(b)(2)(i), Income Tax Regs. Conversely, "No
allocations shall be made if the probable benefits to the other
members were so indirect or remote that unrelated parties would
not have charged for such services." Id.
An arm’s-length charge for services rendered is "the amount
which was charged or would have been charged for the same or
similar services in independent transactions with or between
unrelated parties under similar circumstances considering all
relevant facts." Sec. 1.482-2(b)(3), Income Tax Regs. Unless
the services are an integral part of the business activity of
either the entity rendering the services (renderer) or the entity
receiving them (recipient), or unless the taxpayer establishes a
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