(1) In determining whether there are
substantial intercorporate transactions, the commissioner will consider and
evaluate all activities and transaction of a taxpayer and its related
corporations, including but not limited to:
(i) manufacturing, acquiring goods or
property, or performing services for related corporations;
(ii) selling goods acquired from related
corporations;
(iii) financing sales
of related corporations;
(iv)
performing related customer services using common facilities and employees for
related corporations;
(v) selling
policies or contracts of insurance for related corporations;
(vi) reinsuring risks for related
corporations;
(vii) collecting
premiums or other consideration for any policy or contract of insurance for
related corporations;
(viii)
incurring expenses that benefit, directly or indirectly, one or more related
corporations; and
(ix) transferring
assets, including assets such as accounts receivable, patents, or trademarks
from one or more related corporations.
(2) For purposes of determining whether
substantial intercorporate transactions exist, dividends are not considered in
the measure of intercorporate receipts, total receipts, intercorporate
expenditures, or total expenditures described in section
32.4 of this Part. Interest paid
and received on loans between corporations is considered in determining if
there are substantial intercorporate transactions, including interest on loans
that constitute subsidiary capital pursuant to section 1500(h). Taxes paid or
reimbursed will not be considered in determining if there are substantial
intercorporate transactions. Similar transactions must be treated in a
consistent manner from taxable year to taxable year. Service functions will not
be considered when they are incidental to the business of the corporation
providing such service and expenditures for service functions are not
considered expenditures benefiting a related corporation or a group of related
corporations described in paragraph (3) of subdivision (a) of section
32.4 of this Part. Service
functions include, but are not limited to, accounting, legal, payroll
processing, and personnel services. Where a corporation makes expenditures that
benefit a related corporation or a group of related corporations and allocates
these costs to the related corporation or a group of related corporations, the
intercorporate cost allocations are not considered receipts or expenditures
described in subdivision (a) of section
32.4 of this Part; the
expenditures benefiting the related corporation or group of related
corporations are included in such expenditures described in paragraph (3) of
subdivision (a) of section
32.4 of this Part.
