KENCO Restaurants, Inc. et al. - Page 9

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          482 allocation is arbitrary, capricious, or unreasonable.  Bausch           
          & Lomb, Inc. v. Commissioner, supra; G.D. Searle & Co. v.                   
          Commissioner, 88 T.C. 252, 359 (1987); see also Altama Delta                
          Corp. v. Commissioner, 104 T.C. 424, 456-457 (1995); Seagate                
          Tech. Inc. & Consol. Subs. v. Commissioner, 102 T.C. 149, 163-164           
          (1994).                                                                     
               Neither the absence of tax avoidance motives, nor the                  
          existence of a business purpose, precludes respondent from                  
          reallocating costs under section 482 in order to reflect clearly            
          the respective incomes of members of the controlled group.                  
          Central Cuba Sugar Co. v. Commissioner, 198 F.2d 214, 215-216 (2d           
          Cir. 1952) (dealing with 26 U.S.C. sec. 45 (I.R.C. 1939), the               
          precursor to section 482), revg. and remanding on this issue,               
          16 T.C. 882 (1951); Eli Lilly & Co. v. United States, 178 Ct.Cl.            
          666, 372 F.2d 990, 998-999 (1967); G.D. Searle & Co. v.                     
          Commissioner, supra at 359.                                                 
               C.  Common Control                                                     
               Petitioners are commonly owned corporations, owned in equal            
          shares by the owners either individually or with their respective           
          spouses, and are, thus, "controlled taxpayers" within the meaning           
          of section 482.  See sec. 1.482-1(a)(4), Income Tax Regs.                   
               D.  Arm’s-Length Charges                                               
               The parties have stipulated, and we have found, that the               
          primary purpose of BKK is to provide management and                         
          administrative support services to the other 13 members of the              
          group.  BKK provided such services to the purchasing members, and           



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