Hachette USA, Inc., As Successor to Hachette Publications, Inc. and Curtis Circulation Co., Subsidiary - Page 3

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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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