- 219 -
between unrelated parties. Finally, we conclude that the amounts
charged by United States Trust are not useful because they derive
from years prior to those in issue and do not address, by
definition, the pooled investments and funds LTD arranged for its
clients.
The services in issue were marketed by LTD to the public.
LTD, however, did not actually perform the services but instead
paid INC to perform them. In other words, the services
"rendered" by LTD were the same services INC performed for LTD's
clients on behalf of LTD. Consequently, because the fees that
LTD charged its unrelated clients were an "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
factors", we conclude that such fees represent an arm’s-length
charge within the meaning of section 1.482-2(b)(3), Income Tax
Regs.
We turn now to our calculation of the arm’s length charges
for the services that LTD paid INC to perform. The parties did
not specifically brief what services were to be considered in the
section 482 allocation. In deciding INC’s true taxable income
from service fees, we limit our examination and holding to the
same investment products that we have discussed, supra pp. 29-56,
with regard to LTD’s income and expenses. We note that, in such
discussion, the "Direct Costs" for each category of income did
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