Inverworld, Inc., et al. - Page 138

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            supporting services--to determine whether the 25-percent test                                 
            applies.  Sec. 1.482-2(b)(7)(v), Example (8), Income Tax Regs.                                
            We find that the services that INC rendered were in the nature of                             
            supporting services for purposes of section 1.482-2(b)(7)(ii),                                
            Income Tax Regs.                                                                              
                  The factor of whether the services that INC rendered to LTD                             
            were independent of the other activities of INC is not applicable                             
            to the instant case.  INC performed very few, if any, "other"                                 
            activities that were not for LTD.  Consequently, the services                                 
            that INC rendered to LTD cannot be viewed as "independent" of the                             
            "other activities" of INC because INC had few "other activities".                             
            Accordingly, we believe that the factor of "independent" services                             
            is not relevant to the instant cases.                                                         
                  Based on the foregoing, we conclude that, pursuant to the                               
            facts and circumstances test, INC renders services to a related                               
            party as one of its principal activities within the meaning of                                
            section 1.482-2(b)(7)(ii)(a), Income Tax Regs.  Consequently, we                              
            hold that the services are an integral part of the business                                   
            activity of INC within the meaning of section 1.482-2(b)(7),                                  
            Income Tax Regs.  Because services are an integral part of INC's                              
            business activity, an arm’s-length charge for INC's services                                  
            rendered to LTD 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.                                                                     




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