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found to have traded upon the goodwill generated by the Your Host
corporation’s restaurants; all of them generated goodwill that
they shared equally. We found that the advantage of being a Your
Host Restaurant flowed primarily from the local advertising and
shared management. This was supported by the fact that the
Rochester restaurants nearly failed due to absentee management
problems. The Tax Court concluded that the Your Host corporation
provided no service or benefit to the other 10 corporations for
which it was not already adequately compensated.29
Here, the hotels operated by the Hyatt International group
have only a limited amount of similarity to the restaurants in
Your Host, Inc. v. Commissioner, supra and the same result does
not obtain. HHK and HS through management and local advertising
generated goodwill that benefited Hyatt International hotels and
entities in their regions and beyond. We have held that the
arm’s-length royalty for the Hyatt trade names and marks from HIC
to Hyatt Domestic is .4 percent of the Hyatt International
group’s total hotel gross revenues. As the holder of the
international license to the Hyatt trade names and marks, HIC’s
income should be increased by two-fifth of 1 percent of the gross
revenues of those hotels whose management fees, taking into
29 As previously noted, the parties posed an all-or-nothing
type question to the Court on the sec. 482 issues. See Your
Host, Inc. v. Commissioner, 58 T.C. 10, 29 n.4 (1972), affd. 489
F.2d 957 (2d Cir. 1973).
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