- 40 - As part of the report, Coopers advised JAL that if common control of DHL, DHLI, and MNV existed, the Internal Revenue Service (IRS) might seek to impute a royalty for DHLI’s use of the DHL trademark. Also, because of concerns about DHL’s weak capitalization and lack of profits, Coopers recommended the infusion of equity capital into DHL while safeguarding it from transfer pricing problems. Coopers stated that no royalty should be charged DHL for continued use of the DHL trademark and that such a royalty would make it more difficult for DHL to achieve profitability. Coopers also noted that a 2-percent royalty might be imputed to DHL for its royalty-free license to DHLI. The foreign investors also wanted to ensure that DHL would continue to be a cooperating and effective component of the DHL network. They were also concerned about the possibility that DHL could experience financial difficulties or could be acquired by a competitor, and in that regard they wanted to control the DHL trademark, which they considered to be a valuable strategic asset. The DHL network was the main focus of the foreign investors. During May 1989, in accord with its advisers’ recommendation, JAL decided not to acquire more than a 20-percent equity interest in DHL to minimize JAL’s exposure to risks, including those that could occur with respect to U.S. taxation. The buyers’ and sellers’ representatives were aware of and discussed concerns that DHL could be exposed to liability, taxPage: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Next
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