Procter & Gamble Co. v. Commissioner
United States Tax Court
AG, a Swiss corporation and a wholly owned subsidiary of petitioner, owned 100 percent of E, a corporation organized in Spain. Spanish law effectively precluded E from making royalty payments to AG for the use of petitioner's intangible property. Respondent determined that an allocation of income from E to AG pursuant to section 482 was necessary to clearly reflect income.
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AG, a Swiss corporation and a wholly owned subsidiary of petitioner, owned 100 percent of E, a corporation organized in Spain. Spanish law effectively precluded E from making royalty payments to AG for the use of petitioner's intangible property. Respondent determined that an allocation of income from E to AG pursuant to section 482 was necessary to clearly reflect income. The allocation in turn increased petitioner's subpart F income under section 951. Held, because Spanish law effectively precluded E from paying AG, effectively blocking AG's receipt of the income, there was no impermissible…
1Opinion of the Court
HAMBLEN, Judge:
Respondent determined deficiencies in petitioner’s Federal income tax in the amounts and for the years as follows:
TYE Deficiency
June 30, 1978 . $765,649.04
June 30, 1979 . 1,188,033.02
The issue for decision in this case is whether respondent’s allocations of gross income from Procter & Gamble España, S.A., to Procter & Gamble A.G., pursuant to section 482,2 were arbitrary, capricious, or unreasonable.
FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly. The stipulation and exhibits attached thereto are incorporated herein by this reference.
Procter &…
2Cases cited20 opinions
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- United States v. BasyeSupreme Court of the United States · 1973
- Commissioner v. First Security Bank of Utah, N. A.Supreme Court of the United States · 1972
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