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consideration the adjustments for the allocation of fees, were
remitted to HHK and HS.30
D. Allocation to HIC for Management Services
Beyond limited expense allocations, HIC’s subsidiaries did
not pay for services provided by HIC. Respondent determined that
income should be allocated to HIC from its subsidiaries for
management services. Respondent relies on the provision of the
following services in support of allocations: Manuals, training,
human resource development, employee benefits, contract review,
financial systems and advice, business development assistance,
preopening services, owner relations, marketing, and HIC's
efforts at building the IMAGE reservations system.
Petitioners contend that, for the most part, all management
fees were reported by the entity that earned them. Petitioners
also argue that what HIC did for its subsidiaries was stewardship
or duplication and as such is not subject to section 482
allocations. Petitioners assert that the design and chain
services were provided to and paid for separately by the hotel
owners, not the subsidiaries, and thus were by definition arm’s-
length transactions not subject to section 482. Petitioners also
30 This allocation is for the Hyatt trade names and marks.
We consider the other items proposed by respondent, through his
expert BVS, in the royalty--i.e., corporate overhead and
development activities--under the topic of management services,
below.
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