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the taxable years in issue. As discussed in our prior opinion,
LTD earned income by retaining the difference between the
interest that it obtained on client investments and the interest
that it credited to client accounts,12 which we characterized as
compensation for services. LTD received such service income in
addition to the management fee or commission that it charged its
clients for a particular investment. In sum, we do not
reconsider any of the section 482 allocations of income to INC,
which, as to LTD, take the form of additional compensation
expenses.
E. Section 482 Correlative Adjustments
Petitioners' motion requests that we reconsider our holding
in our prior opinion that LTD is not entitled to a correlative
adjustment, pursuant to section 1.482-1(d)(2), Income Tax
Regs.,13 once a primary adjustment is made to INC's income.
12 As we found in our prior opinion, during 1986, the
discretionary authorization signed by each LTD client was changed
to include the provision that
The rate of return credited to the Client's account may
not reflect directly the rate of return earned by
specific investments; the Client's rate of return may
be net of expenses or may reflect the fact that * * *
[LTD] may retain the benefit of special rates
attributable to the volume of investments controlled by
* * * [LTD].
13 Section 1.482-1(d)(2), Income Tax Regs., provides:
Whenever the district director makes adjustments
to the income of one member of a group of controlled
taxpayers (such adjustments being referred to in this
(continued...)
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