- 18 - that LTD actually received, even on a gross basis, from its clients. Petitioners argue that the law does not permit allocation from a parent to a subsidiary of an amount that is more than the amount that the parent itself actually received. Petitioners argue that such an allocation would constitute the creation, rather than the allocation, of income. Petitioners also contend that the allocations are inconsistent with our stated intention to allocate only the "fees that LTD charged its unrelated clients" because those charges represented the arm's- length charge within the meaning of section 1.482-2(b)(3), Income Tax Regs. Petitioners argue that the maximum allocation to INC should be the net amount of revenues actually received by LTD for placing the client funds with third parties. Petitioners contend that, as respondent's notice of deficiency used a net figure, viz, LTD's income after direct expenses, in making the original section 482 allocations, respondent acknowledges that a allocation of gross receipts is not justified. Alternatively, petitioners contend that even an allocation of the net amount of revenues is "excessive", arguing that the evidence shows that INC did nothing to "manage" the deposits and only made "bookkeeping entries". As a final alternative argument, petitioners argue that the FEIM Fund allocation from LTD to INC should be reduced to zero because of our finding that "INC's only role was to arrange for transfer of the client funds to Merrill Lynch inPage: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
Last modified: May 25, 2011