[Code of Federal Regulations]
[Title 26, Volume 18, Parts 500 to 599]
[Revised as of April 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR514.106]

[Page 96]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 514--FRANCE--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 514.106  Control of a domestic enterprise by a French enterprise.

    Article 5 of the convention provides that if a French enterprise by 
reason of its control of a domestic business imposes conditions 
different from those which would result from normal business relations 
between independent enterprises, the accounts between the enterprises 
will be adjusted so as to ascertain the true net income of the domestic 
enterprise. The purpose is to place the controlled domestic enterprise 
on a tax parity with an uncontrolled domestic enterprise by determining, 
according to the standard of an uncontrolled enterprise, the true net 
income from the property and business of the controlled enterprise. The 
convention contemplates that if the accounting records do not truly 
reflect the net income from the property and business of such domestic 
enterprise the Commissioner of Internal Revenue shall intervene and, by 
making such distributions, apportionments, or allocations as he may deem 
necessary of gross income or deductions of any item or element affecting 
net income as between such domestic enterprise and the French enterprise 
by which it is controlled or directed, determine the true net income of 
the domestic enterprise. The provisions of Sec. 29.45-1 of Regulations 
111 (26 CFR 1949 ed. Supps. 29.45-1) [and Sec. 39.45-1 of Regulations 
118 (26 CFR, Rev. 1953, Parts 1-79, and Supps.)], shall, in so far as 
applicable, be followed in the determination of the net income of the 
domestic business.