[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: 26CFR509.106]

[Page 42-43]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 509--SWITZERLAND--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 509.106  Control of a United States enterprise by a Swiss enterprise.

    In effect, Article IV of the convention provides that, if a Swiss 
enterprise by reason of its control of a United States enterprise 
imposes on the latter enterprise conditions different from those which 
would result from normal business relations between independent 
enterprises, the accounts between the enterprises shall be adjusted in 
order to ascertain the true taxable income of each enterprise. The 
purpose is to place the controlled United States enterprise on a tax 
parity with an uncontrolled United States enterprise by determining, 
according to the standard of an uncontrolled enterprise, the true 
taxable income from the property and business of the controlled 
enterprise. The basic objective of the article is

[[Page 43]]

that, if the accounting records do not truly reflect the taxable income 
from the property and business of the United States enterprise, the 
Commissioner shall intervene and, by making such distributions, 
apportionments, or allocations as he may deem necessary of gross income, 
deductions, credits, or allowances, or of any item or element affecting 
taxable income, between the United States enterprise and the Swiss 
enterprise by which it is controlled or directed, shall determine the 
true taxable income of the United States enterprise. The provisions of 
section 482 of the Internal Revenue Code of 1954, and the regulations 
thereunder, shall, insofar as applicable, be followed in the 
determination of the taxable income of the United States enterprise.