- 71 - allocations from the network fee allocation, causing some duplicate income allocation. In proposing the network fee adjustment, Huff based his conclusion on available information, and he did not think it necessary to analyze DHL’s profitability on international outbound and domestic shipments. OPINION I. Background The nucleus about which the controverted issues revolve is a transaction among the shareholders of petitioners and related foreign DHL corporations and foreign investors. Those investors collectively became the majority shareholders in the related foreign DHL entities. That transaction involved the sale of more than 50 percent of the portion of the DHL network outside the United States. Respondent determined that section 482 should be employed to allocate income among petitioners and the related foreign corporations. Those allocations involve the sale and use of trademark and the exchange and performance of services with the potential for arm’s-length pricing issues. In particular, respondent determined that, between controlled entities, the DHL trademark was sold for less than its fair market value, that DHL, as owner of the trademark, failed to charge royalties for DHLI’s use of same, that the controlled corporations did not charge or charged less than an arm’s-length amount for services between them, and that part of DHLI’s income was allocable to DHL.Page: Previous 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 Next
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