The Coca-Cola Company, and Includible Subsidiaries - Page 20

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          production costs associated with the possession product equal 10            
          cents per unit, resulting in a PCR of 12.5 percent.  The PCR is             
          then applied to the total expense amount of $1.48 per unit,                 
          resulting in approximately 19 cents per unit expense allocation.            
          The CTI equals $2.05 per unit, resulting in a tax credit equal to           
          the tax attributable to approximately $1.03 per unit of beverage            
          product sold.                                                               
               In this example, only 12.5 percent of the expenses known to            
          be factually related to the sale of the integrated product are              
          allocated and apportioned to the income derived from the sale of            
          the possession product.  This results in an increased CTI figure,           
          which in turn increases the amount of the section 936 possessions           
          tax credit.  Thus, where production costs at the possession level           
          are small in relation to the total production costs, as in the              
          instant case, a low PCR is produced, resulting in the allocation            
          of a relatively small percentage of the total amount of expenses            
          to the income derived from the sale of the possession product.              
               Respondent argues that the application of the PCR in the               
          instant case results in unapportioned USA expenses totaling                 
          $227,213,515 in 1985, representing approximately 89.84 percent of           
          the total amount of expenses for that year, and unapportioned               
          expenses totaling $263,021,507 in 1986, representing 91.7 percent           
          of the total expenses for that year.                                        
               Both parties acknowledge that regardless of the form in                
          which the concentrate is sold, i.e., one unit of concentrate,               




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