- 10 - all of its costs were charged to the purchasing members as fees for those services. Thus, we find that BKK rendered services to related parties as one of its principal activities. As a consequence, rendering services was an integral part of BKK’s business activity within the meaning of section 1.482- 2(b)(7)(ii), Income Tax Regs. Because of that, the cost or deductions incurred by BKK with respect to the services rendered by BKK to the purchasing members (and passed through to the purchasing members) is not deemed equal to an arm's-length charge for those services. See sec. 1.482-2(b)(3), Income Tax Regs. Instead, an arm's-length charge is the amount that would have been charged for the same or similar services in independent transactions with or between unrelated parties under similar circumstances considering all the relevant facts (the independent transactions standard). Id. Before concluding this discussion of arm's-length charges, it is important to note that we are not here concerned with the arm's-length charge for the totality of services provided by BKK to the purchasing members for each year (BKK's total yearly fees), which respondent does not challenge, but rather with the allocation of BKK's total yearly fees among the purchasing members. E. Reasonableness of Allocation 1. Respondent’s Reallocation Respondent’s reallocation is reflected in the statutory notice of deficiency received by each petitioner. Each suchPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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