DHL Corporation and Subsidiaries - Page 144

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          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.                  




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Last modified: May 25, 2011