- 15 - B. Parties' Positions Respondent first argues that Q&A-1 governs in the instant case, requiring that all expenses USA incurs and those CBO expenses that are factually related to gross income from the sale of concentrate be apportioned in full to such income regardless of the form in which the possession product is sold. Second, respondent argues in the alternative that even were Q&A-12 controlling in the instant case, the application of the production cost ratio contained in Q&A-12 produces absurd results, and petitioner's motion should be denied on the basis of Exxon Corp. v. Commissioner, 102 T.C. 721 (1994). Respondent maintains that the question before this Court is whether Congress intended the results that flow from petitioner's application of the production cost ratio (PCR) to the U.S. affiliates' expenses known to be factually related to the gross income derived from CRI's component concentrate. Respondent argues further that the factual relationship test found in section 1.861-8(b) and (c), Income Tax Regs., is adopted in section 936(h)(5)(C)(ii)(II) through its overall incorporation of the standards contained in section 861. Respondent claims that Q&A-12 must be read in the context of the statute and is to be applied only as a supplement to Q&A-1, which determines, according to respondent, the expenses allocable and apportionable to the possession product in all cases including those cases in which the possession product is sold in a component form.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011