24.2 Provisions for the determination of Transfer Prices 24-5 three years. The taxpayer provided evidence that a third party bought the same products for the same price, but the court did not analyze this transaction, arguing that it would have been irrelevant for the intercompany transaction in the light of the loss situation However, recent court rulings indicate that the federal tax court now seems to have changed its view. In these more recent rulings, the tax court elaborated the prudent business manager concept in such a way that the conditions of a transac tion would have to be agreed upon by two prudent business managers with oppos- ing interest. 2 This is now called the theory of the doubled prudent business man- nger, meaning that there are two business managers facing each other in a transaction (ii Eliminating the Distinction. Based on this most recent tax court rul- ng, it now appears that the substance of section 8 of the Corporation Tax Code is identical to the intermational standard. however, there is still a decisive difference in formality standards. In addition to the arms length test, the deductibility of a payment requires that it is based on contractual agreements that were entered into in advance, in clear and unambiguous terms. This condition is based on jurispru- dence developed by the Federal Tax Court in the context of business relationships between individuals belonging to the same family. This relationship standard was later expanded to cover payments made to controlling shareholders The relationship standard basically amounts to an antiavoidance measure. As such, it is designed to prevent a group of related taxpayers from rearranging their have adjusted the income even if the transactions have been at arm's lengtourts tax situations to their advantage using the benefit of hindsight. Thus, the (e) Hidden Capital Contribution The rules governing hidden capital contributions are found in section 4, para- graph 1, of the Income Tax Code in conjunction with section 8, paragraph 1, of the Corporation Tax Code. A hidden capital contribution(verdeckte Einlage)can be as- sumed if a shareholder or a related party of the shareholder makes a contribution to the corporation without proper consideration and the reason for this contribution can be found only in the shareholder relationship Like the principles that apply to hidden profit distributions, the rules governing hidden capital contributions were developed by jurisprudence ISee Federal Tax Court, February 17, 1993 Federal Tax Court, May 17, 1995, BStB1. II 1996, P. 204; Federal Tax Court, December 6, 1995, BStBl.II 1996,p.383 poppen, in: Becker/Kroppen(eds ) Handbuch In rechnungspreise, Cologne: Schmidt, 1999,n. w97: Baumhoff, in: FS Flick, pp 633 ff. Wassermeyer, DB 1994, pp. 110 ff.; Becker, DB 1996, 14See Federal Tax Court, April 26, 1989, BStB1. I 1989, p 673 See, for example, Federal Tax Court, October 12, 1995, BFH/NV 1996, p. 266