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services for those operations is the amount of LTD’s revenues
minus the amounts earned by the Guadalajara office.33
LTD paid INC to perform services for other funds,
operations, and transactions. The amount that LTD earned is the
amount that LTD charged its clients. Accordingly, the arm’s
length charge for INC’s services for such operations is the
amount of LTD’s revenues.
We calculate the arm's length charges for INC's services as
follows:
TYE June 30, 1985
Certificates of deposit 70,175,000 x 0.50%= $350,875
Cash & investment funds 10,274,000 x 0.50%= 51,370
Treasury bills 1,482,000 x 0.50%= 7,410
Currency transactions LTD’s revenues= 531,003
Currency swaps LTD’s revenues= 54,386
Total 995,044
TYE June 30, 1986
Certificates of deposit 100,180,000 x 0.50%= 500,900
Cash & investment funds 19,199,000 x 0.50%= 95,995
Treasury bills 3,355,000 x 0.50%= 16,775
33
For LTD’s taxable year ended June 30, 1987, its revenues
from currency transactions totaled $434,867, of which $11,361 was
earned by the Guadalajara office. Accordingly, we calculate
INC’s arm’s length charge for the services that it rendered as
$423,506.
For LTD’s taxable year ended June 30, 1988, its revenues
from currency transactions totaled $232,426, of which $16,426 was
earned by the Guadalajara office. Accordingly, we calculate
INC’s arm’s length charge for the services that it rendered as
$216,000.
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