- 83 -
section 482 determinations, petitioners must show an abuse of
respondent's discretion.21
V. Arm’s-Length Consideration
A. Respondent’s Allocations of Management Fee Revenue for
HHK, HS, and HIC
HHK and HS received management fee revenue from hotels for
which HHK or HS did not provide services. In this regard,
petitioners acknowledge that HIC was responsible for European and
Central American hotels throughout the years in issue (1976
through 1983). Accordingly, we sustain respondent’s allocation
of income for these hotels to HIC.22
HHK received consulting fees and royalties from HESA without
performing services for HESA or the Mexican hotels. HESA managed
the hotels in Mexico and earned the management fees, and the
consulting agreement was merely a mechanism to reduce local
21 In the final analysis, it did not make a difference that
petitioner was unable to show that all of respondent's
determinations were arbitrary, capricious, or unreasonable. That
is so because, in those instances where we redetermined an arm’s-
length consideration, petitioners were not able to meet the
lesser standard of showing that their reporting or trial position
was for an arm’s-length consideration.
22 BVS recommended allocation of revenue from certain
hotels in the Middle East and North Africa. These particular
hotels were not in operation during the years affecting the
allocations to HIC (1976 through 1983), and allocation in the
later years that involve only Hyatt Domestic’s allocations
(through 1988) would not change the result because, ultimately,
the royalties were computed as a percentage of gross hotel
revenues rather than being based on HIC’s revenues. Thus, it is
not necessary to analyze the particulars of hotels managed in
those regions.
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