Kaps Warehouse, Inc. - Page 13

                                               - 13 -                                                 
           regulations provide a guide to identifying the "true taxable                               
           income" of each entity on the basis of the taxable income that                             
           would have resulted had the entities been uncontrolled parties                             
           dealing at arm's length.  See Sundstrand Corp. & Subs. v.                                  
           Commissioner, supra at 353; sec. 1.482-1(b)(1), Income Tax Regs.                           
                  The Commissioner's determination as set forth in the notice of                      
           deficiency is presumptively correct.  The taxpayer has the burden                          
           of disproving that determination.  Rule 142(a); Welch v. Helvering,                        
           290 U.S. 111 (1933).  In meeting its burden, the taxpayer must                             
           prove that it did not improperly utilize its control to shift                              
           income.  Procter & Gamble Co. v. Commissioner, 95 T.C. 323, 331                            
           (1990), affd. 961 F.2d 1255 (6th Cir. 1992). Furthermore, where the                        
           Commissioner determines that an allocation under section 482 is                            
           necessary to prevent either tax evasion or the distortion of a                             
           taxpayer's income, the determination must stand unless the taxpayer                        
           proves that the determination is unreasonable, arbitrary, or                               
           capricious. Ballentine Motor Co. v. Commissioner, 321 F.2d 796, 800                        
           (4th Cir. 1963), affg. 39 T.C. 348 (1962); Seagate Tech., Inc. &                           
           Consol. Subs. v. Commissioner, supra at 164; Sundstrand Corp. &                            
           Subs. v. Commissioner, supra at 353.  Absent a showing of abuse of                         
           discretion, the Commissioner's section 482 determination must be                           
           sustained.  Sundstrand Corp. & Subs. v. Commissioner, supra; Bausch                        
           & Lomb, Inc. & Consol. Subs. v. Commissioner, 92 T.C. 525, 582                             
           (1989), affd. 933 F.2d 1084 (2d Cir. 1991).  "Whether respondent                           






Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011