- 101 -
allege that there was little IPS activity during the years in
issue.
Allocations may be made where one member of a controlled
group performs services for the benefit of, or on behalf of,
another member of the group. See sec. 1.482-2(b)(1), Income Tax
Regs. “Allocations will generally not be made if the service is
merely a duplication of a service which the related party has
independently performed or is performing for itself.” Sec.
1.482-2(b)(2)(ii), Income Tax Regs.; see Young & Rubicam, Inc. v.
Commissioner, 187 Ct. Cl. 635, 410 F.2d 1233 (1969). In
addition, section 482 allocations are inappropriate for
stewardship activities because the benefit is to the parent
entity. See Young & Rubicam, Inc. v. United States, 410 F.2d at
1245-1247; Eli Lilly & Co. v. Commissioner, 84 T.C. at 1154;
Columbian Rope Co. v. Commissioner, 42 T.C. at 813-814. We find
that items such as HIC’s audits, reporting requirements,
reviewing contracts, and providing for consistency of accounting
systems are supervisory functions that benefited the parent
company and are not management services. See Young & Rubicam,
Inc. v. United States, 410 F.2d at 1245-1247. Likewise, business
development activities, financial guaranties, and owner relations
are to the benefit of the parent company and not subject to
allocation. See id. However, we are, likewise, not persuaded by
petitioners’ argument that chain and design services should not
Page: Previous 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 NextLast modified: May 25, 2011