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In any case of two or more organizations, trades,
or businesses * * * owned or controlled directly or
indirectly by the same interests, the Secretary may
distribute, apportion, or allocate gross income,
deductions, credits, or allowances between or among
such organizations, trades, or businesses, if he
determines that such distribution, apportionment, or
allocation is necessary in order to prevent evasion of
taxes or clearly to reflect the income of any of such
organizations, trades, or businesses. * * *
Section 1.482-1(b)(1), Income Tax Regs., explains the purpose of
section 482 as follows:
The purpose of section 482 is to place a controlled
taxpayer on a tax parity with an uncontrolled taxpayer,
by determining, according to the standard of an
uncontrolled taxpayer, the true taxable income from the
property and business of a controlled taxpayer. * * *
Generally put, section 482 is designed to prevent artificial
distorting of the true net incomes of commonly controlled
entities. The Commissioner has broad discretionary power to
allocate income, and a heavier than normal burden is placed on
the taxpayer to prove that the allocation is arbitrary or
unreasonable. Procter & Gamble Co. v. Commissioner, 95 T.C. 323,
331 (1990), affd. 961 F.2d 1255 (6th Cir. 1992). In meeting its
burden, petitioner must show that it did not improperly utilize
its control to shift income. Id.
Petitioner concedes that it and AFLIC are under common
control. Petitioner, however, argues that it did not improperly
utilize its control over itself and AFLIC to shift commission
income from itself to AFLIC, because under Mississippi law it
would have been illegal for petitioner, during the years in
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Last modified: May 25, 2011