Tower Loan of Mississippi, Inc. - Page 14

                                       - 14 -                                         
          pursuant to section 482 was inappropriate when the taxpayer’s               
          receipt of such income was prohibited by local law.  The Court              
          concluded that section 1.482-1(b)(1), Income Tax Regs.,                     
          contemplated that the controlling interest, i.e., the holding               
          company, must have “complete power” to shift income among its               
          subsidiaries.  Id. at 404.  Section 1.482-1(b)(1), Income Tax               
          Regs., provides, in pertinent part, as follows:                             
               The interests controlling a group of controlled taxpayers              
               are assumed to have complete power to cause each controlled            
               taxpayer so to conduct its affairs that its transactions and           
               accounting records truly reflect the taxable income from the           
               property and business of each of the controlled taxpayers.             
               * * *                                                                  

               Thus, the Court continued, it is only when this power                  
          exists, and has been used to understate the controlled taxpayer’s           
          true income, that the Commissioner is authorized to reallocate              
          income under section 482.  Id.  The Court concluded that the                
          holding company did not have the “complete power” to shift income           
          between its controlled interests unless it violated the Federal             
          banking laws.  Moreover, the Court concluded that the “complete             
          power” referred to in the regulations hardly includes the power             
          to force a subsidiary to violate the law.  Id. at 405.                      
               Applying the same type of analysis, we hold that petitioner            
          could not have received commission income from AFLIC without                
          violating Mississippi State law as provided in Miss. Code Ann.              
          secs. 83-17-105 and 83-17-7 (1973) and as construed by the                  
          Mississippi Supreme Court in Tew v. Dixieland Finance, Inc.,                

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  Next

Last modified: May 25, 2011