The Coca-Cola Company, and Includible Subsidiaries - Page 6

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          in that prior case, docket No. 17171-91, similar to the one filed           
          in the instant case.  Respondent thereafter conceded the prior              
          case in November 1992.  On November 10, 1992, the Commissioner              
          opened a regulation project with respect to the computation of              
          combined taxable income under section 936(h).  In October 1993,             
          respondent issued the notice of deficiency in the instant case,             
          determining deficiencies in petitioner's Federal income taxes for           
          1985 and 1986 in the amounts of $30,504,383 and $42,640,008,                
          respectively.  Respondent determined that petitioner was not                
          entitled to the amount of the section 936 tax credit claimed on             
          its returns for the years at issue.  The petition in the instant            
          case was filed January 4, 1994.  On January 12, 1994,                       
          respondent's proposed amendment to Q&A-12 was published in the              
          Federal Register.  See infra note 5.                                        
               A secondary dispute in the instant case involves the                   
          treatment of interest expense with respect to computing combined            
          taxable income under section 936.  We are asked to decide whether           
          petitioner may net interest income against interest expense in              
          determining the amount of interest deduction to be allocated and            
          apportioned in computing combined taxable income.  Respondent               
          contends that interest netting violates section 1.861-8(e)(2),              
          Income Tax Regs., and petitioner must allocate and apportion the            
          amount of its gross interest expense in determining combined                
          taxable income.  As a preliminary matter, we summarily reject               
          respondent's argument and find, without further analysis, on the            




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