- 21 -
Our inquiry is whether the fees paid by LTD to INC meet the
standard of arm's-length charges within the meaning of section
1.482-2(b)(3), Income Tax Regs. In our prior opinion, we
concluded that an arm's-length charge, within the meaning of
section 1.482-2(b)(3), Income Tax Regs., for the services
performed by INC on behalf of LTD was the amount that LTD charged
its unrelated clients. Petitioners do not argue that INC
rendered no services relating to the Currency Fund and the FEIM
Fund during the taxable years in issue. After considering
petitioners' arguments, we do not reconsider our holding in our
prior opinion that the arm's-length charges for the services
performed by INC on behalf of LTD are the amounts which LTD
charged its unrelated clients. As the fees that INC reported as
deriving from LTD were less than the arm's-length charges,7
petitioners have not met the arm's-length standard.
We also find no merit in petitioners' argument that, because
respondent's original section 482 allocations in the notice of
deficiency used net amounts, we may only consider allocations
based upon net amounts. Allocations based upon net amounts are
not dispositive for purposes of the arm's-length framework
provided by section 482 and the regulations thereunder.
7 As we stated, supra, petitioners did not establish the
amounts that INC earned for each individual investment product.
Consequently, for purposes of sec. 482, we compare LTD's annual
payment to INC with the sum of the arm's-length charges
calculated for the services INC rendered to LTD.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011