- 279 - In order to justify a reallocation under section 482, the Commissioner must find (1) that there are two or more trades, businesses, or organizations, (2) that such enterprises are owned or controlled by the same interests, and (3) that the reallocation is necessary to allocate income among the two or more enterprises in order to prevent evasion of taxes or to properly reflect each enterprise's income. See B. Forman Co. v. Commissioner, 453 F.2d 1144, 1152 (2d Cir. 1972), affg. in part, revg. in part 54 T.C. 912 (1970). Section 482 was intended to apply and has been applied to cases where the profits of one business have been offset against the losses of another to reduce or escape tax liability. See Ach v. Commissioner, 42 T.C. 114 (1964), affd. 358 F.2d 342 (6th Cir. 1966). In these cases, there was shifting of profits from one business to another (from petitioners to the various Kanter entities); thus the primary evil that section 482 was designed to prohibit is present. We hold that respondent's reallocation under section 482 was not unreasonable. 4. Conclusion We have found that 70 percent of the payments from Hyatt to KWJ Corp., all of the payments by Frey to Zeus, all of the payments from Schaffel to IRA, the bargain element in the sale of the Schnitzer-PMS stock to IRA, and all of the EssexPage: Previous 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 Next
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