- 5 - unrelated retailers. The CBO's that purchase fountain syrup sell the fountain syrup to unrelated retailers. CRI is both the possessions corporation and the electing corporation within the meaning of section 936. Under section 1504(b), a section 936 possessions corporation is required to file a separate U.S. corporate return and is therefore ineligible to join in the parent corporation's consolidated return. The issues before us for partial summary judgment arise out of the section 936 tax credit, which is designed to encourage investment and employment in Puerto Rico and other possessions of the United States. The amount of the credit is derived from the amount of the "combined taxable income" (sometimes referred to as CTI) derived from the "possession product". The primary dispute in the instant case involves the dividing of income and expenses between related parties. More specifically, the dispute involves whether the use of a formulaic calculation, or rather a calculation based upon factual relationships, is mandated in order to obtain the proper allocation and apportionment of expenses to the gross income derived from the sale of a component possession product by a U.S. affiliate. Petitioner filed its Federal income tax returns for taxable years 1983 through 1986 relying in part on section 1.936-6(b)(1), Q&A-12, Income Tax Regs. (Q&A-12). Respondent issued a deficiency notice to petitioner in 1991 for taxable years 1983 and 1984. Petitioner filed a motion for partial summary judgmentPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011