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reasonable protective approach based on the information that was
made available and the conditions extant at the time of the
determination. Therefore, petitioners have not shown that they
should be relieved from showing an abuse of discretion by
respondent.6
III. The Question of Control
Respondent’s authority to allocate income is predicated on
the entities’ being commonly controlled. For purposes of section
482, “control” is broadly defined to include “any kind of
control, direct or indirect, whether legally enforceable, and
however exercisable or exercised.” Sec. 1.482-1A(a)(3), Income
Tax Regs. In determining whether entities are commonly
controlled, the courts look to “reality of control” rather than
just to actual stock ownership. Grenada Indus., Inc. v.
Commissioner, 17 T.C. 231 (1951), affd. 202 F.2d 873 (5th Cir.
1953). Further, when the interests controlling one entity and
those controlling another have a common interest in shifting
income from the former to the latter, entities may be considered
commonly controlled. This is especially true where one entity
deals with another on other than an arm’s-length basis. Sec.
1.482-1A(a)(3), Income Tax Regs.
6 Ultimately, our ruling on this aspect has no effect on
the outcome of the issues. In one instance, petitioners showed
an abuse of discretion; in all others the outcome was based on a
preponderance of the evidence to decide fair market value or
arm’s-length prices. The ultimate findings or holding generally
fell somewhere in between the parties’ trial positions.
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