- 103 -
Thus, petitioners are correct that, under certain circumstances,
the cost of providing the services may be treated as the arm’s-
length consideration in lieu of the amount that an unrelated
party would charge. This is permitted where the services are not
an integral part of the business of either the renderer or the
recipient of the services. Respondent argues that all of the
services provided by HIC were integral to its business.
Conversely, petitioners argue that none of the services were
integral to the business.
Section 1.482-2(b)(7)(i) through (iv), Income Tax Regs.,
describes situations in which services shall be considered an
integral part of the business activity of a member of a group of
controlled entities.31
31 In pertinent part, the section 1.482-2(b)(7)(i) through
(iv), Income Tax Regs. provides:
(i) Services are an integral part of the business
activity of a member of a controlled group where either
the renderer or the recipient is engaged in the trade
or business of rendering similar services to one or
more unrelated parties.
(ii) Services are an integral part of the business
activity of a member of a controlled group where the
renderer renders services to one or more related
parties as one of its principal activities.
* * * * * * *
(iii) Services are an integral part of the
business activity of a member of a controlled group
where the renderer is peculiarly capable of rendering
the services and such services are a principal element
(continued...)
Page: Previous 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 NextLast modified: May 25, 2011