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ascertain the portion of the adjustment for hotels not managed
from the “excess” income attributable to those respondent
determined were actually managed. After computing the total
income to be allocated from the subsidiaries, respondent
subtracted the royalty for the use of the trade names and marks
to arrive at the amount allocated for services.
In the reports that predated the deficiency notice, Mr. Burt
and Dr. Mooney opined that the amount earned by a hotel in excess
of the “normal return” was allocated to HIC in recognition of
HIC’s contribution of intangibles and services. The theory
advanced for those allocations was that the excess over a “normal
return” was due to the benefit and advantages of being a part of
the chain, which were contributed by HIC. In establishing a
“normal return”, both Mr. Burt and Dr. Mooney used amounts
reported by others as the minimum acceptable earnings. One used
the independent hotel operator figure of $62,000, and the other
considered the chain operator’s figures ranging from $65,000 to
$120,000, but ultimately used the amounts reflected in two Hyatt
International contracts. Mr. Burt used $62,000 for the years
1982 and 1983 (the latest years in issue) and increasing amounts
ranging from $73,200 for 1976 to $100,000 for 1980. The use of
the $62,000 figure resulted in losses for the subsidiaries.
There was no apparent consideration of the sizes or locations of
the hotels used in the Eyster study, or of the hotels involved in
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