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Moreover, we held in our prior opinion that respondent's
allocations are arbitrary insofar as respondent failed to
identify which activities of INC earned what revenue and failed
to distinguish income earned by LTD from income earned by INC.
Petitioners argue that even an allocation of the net amount
of revenues is "excessive" because INC only made "bookkeeping
entries" and that the FEIM Fund allocation should be reduced to
zero because INC's only role was to arrange for the transfer of
client funds and to include a monthly statement of the client's
share of the fund value. Notwithstanding petitioners'
characterization of INC's services, INC did in fact render
services to LTD related to the Currency Fund and the FEIM Fund.
INC, as to both funds, inter alia, accepted clients' deposits and
issued periodic statements to clients, and, as to the FEIM Fund,
transferred clients' deposits to Merrill Lynch. As respondent
determined that income should be allocated to INC pursuant to
section 482, INC's true taxable income from its performance of
such services must be ascertained; i.e., the taxable income that
would have resulted to INC in an arm's-length transaction. See
Altama Delta Corp. v. Commissioner, 104 T.C. 424, 456 (1995);
Seagate Tech., Inc. & Consol. Subs. v. Commissioner, 102 T.C.
149, 164 (1994); Sundstrand Corp. & Subs. v. Commissioner, supra
at 353. In our prior opinion, we held that, as to INC's income
derived from rendering services to LTD related to the Currency
Fund and the FEIM Fund, petitioners failed to meet the arm's-
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