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Inc. & Subs. v. Commissioner, 849 F.2d 393 (9th Cir. 1988), affg.
85 T.C. 754, 785 (1985); Altama Delta Corp. v. Commissioner, 104
T.C. 424, 456 (1995); Seagate Tech., Inc. & Consol. Subs. v.
Commissioner, 102 T.C. 149, 163 (1994); Sundstrand Corp. & Subs. v.
Commissioner, 96 T.C. 226, 352-353 (1991); Inverworld, Inc. v.
Commissioner, T.C. Memo. 1996-301, supplemented by T.C. Memo. 1997-
226. Section 482 is designed to prevent artificial distortion of
the true net incomes of commonly controlled entities. As this
Court has stated:
In order to prevent the artificial shifting of
income from one related business to another,
section 482 places a controlled taxpayer on a
parity with an uncontrolled taxpayer, by
determining according to the standard of an
uncontrolled taxpayer, the true net income of
a controlled taxpayer. Thus, income which has
been artificially diverted to one member of a
controlled group but which in fact was earned
by another member of the group may be
"allocated" by the Commissioner under section
482 * * * [to] the entity which really earned
it. * * * [Citations omitted.]
Huber Homes, Inc. v. Commissioner, 55 T.C. 598, 605 (1971); see
also sec. 1.482-1(b)(1), Income Tax Regs.
An arm's-length standard is used to determine whether
reallocations between controlled entities are necessary. The
2(...continued)
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.
* * *
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