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provided, Hyatt Domestic would charge the Hyatt International
group a prorated chain allocation10 on a per room basis as
follows: Non-North American hotels to pay 50 percent of the
usual chain allocation; Canadian hotels to pay 75 percent; United
States hotels to pay 100 percent. These percentages were based
on the perceived relative benefit received by each group of
hotels. Effective February 1, 1980, HIC and Hyatt Domestic
agreed to represent each other in their respective geographical
markets and to separately control and account for their
respective expenses. As of 1980, Hyatt Domestic concluded that
the exchanged benefits had equalized, so that no further charges
were allocated for chain expenses to Hyatt International hotels.
Pursuant to the 1974 agreement, HIC charged Hyatt Domestic
the following amounts:
Taxable year
ending Amount
Dec. 31, 1975 $296,250
Dec. 31, 1976 368,746
Dec. 31, 1977 489,591
Dec. 31, 1978 568,750
Dec. 31, 1979 666,080
Dec. 31, 1980 56,250
HIC’s charges for chain-type services were included in Hyatt
Domestic’s total chain expenses. The total of chain services
expense was billed by Hyatt Domestic directly to Hyatt
10 “Chain allocation” refers to the amount determined by
the cost-sharing formula applied to chain services.
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