[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: 26CFR520.105]

[Page 129]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 520--SWEDEN--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 520.105  Control of a domestic enterprise by a Swedish enterprise.

    Article III of the convention provides that if a Swedish enterprise 
by reason of its control of a domestic business imposes conditions 
different from those which would result from normal bargaining between 
independent enterprises, the accounts between the enterprises will be 
adjusted so as to ascertain the true net income of the domestic 
enterprises. 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 shall intervene and, by making such 
distributions, apportionments or allocations as he may deem necessary of 
gross income or deductions or of any item or element affecting net 
income as between such domestic enterprise and the Swedish enterprise by 
which it is controlled or directed, determine the true net income of the 
domestic enterprise. The provisions of Regulations 103 (26 CFR 1938 ed. 
Supps. 19.45-1), [Regulations 111 (26 CFR 1949 ed. Supps. 29.45-1) and 
Regulations 118 (Sec. 39.45-1, 26 CFR, Rev. 1953, Parts 1-79, and 
Supps.)] shall, insofar as applicable, be followed in the determination 
of the net income of the domestic business.

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