Bausch & Lomb Incorporated and Consolidated Subsidiaries v. Commissioner of Internal Revenue

MAHONEY, Circuit Judge:

26 U.S.C. § 482 1 authorizes the Commissioner of Internal Revenue (the “Commissioner”) to reallocate gross income, deductions, credits, or allowances among commonly controlled entities in order to prevent tax evasion or clearly to reflect their income. Section 482 empowers the Commissioner to determine the taxable income of the commonly controlled entities as if they had conducted their affairs in the manner of unrelated entities dealing at arm’s length. See Treas.Reg. § 1.482-l(b)(l).

In a notice of deficiency dated December 30, 1985 relating to the income tax liability…