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After concessions, the issues for decision are: (1) Whether
section 1.458-1(g), Income Tax Regs., which requires a taxpayer
to reduce cost of goods sold when it elects to exclude sales
income under section 458, is invalid; and (2) even if it is
invalid, whether a taxpayer must obtain the Secretary's consent
under section 446(e) before recomputing its taxable income
without the erroneous cost of goods sold adjustments. Because we
hold that the regulation is valid, we find it unnecessary to
reach the second issue.
Stipulations by the Parties
The facts have been fully stipulated and are so found. The
stipulation of facts and the exhibits attached thereto are
incorporated herein by this reference.2 Petitioner Hachette USA
is a Delaware corporation whose principal place of business on
the date the petitions in this case were filed was in New York,
New York. Petitioner Curtis was organized under Delaware law on
May 28, 1986. From that time until June 30, 1987, it was a
member of an affiliated group of corporations whose parent was
Hachette Publications, Inc., a New York corporation (HPI).
Curtis' income and deductions from May 28 through December 31,
1986, were included in the consolidated Federal income tax
return, Form 1120, U.S. Corporation Income Tax Return (Form
1120), filed by HPI for HPI's 1986 taxable year. Curtis' income
2 Respondent contested the relevance of petitioners'
Exhibit 10. Accordingly, this exhibit is not incorporated.
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