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respect to expenses incurred by petitioner's corporate and USA
divisions, the amount of expenses apportionable to CRI's
component concentrate gross income can be precisely quantified,
according to respondent. Petitioner concedes, for purposes of
the instant motion, that USA incurred approximately the same
amount of expense, on a per-gallon basis, regardless of whether
USA sold the concentrate to third parties in its integrated form
or in its unchanged form. Thus, respondent argues that USA
expenses factually attributable to the concentrate must be
allocated and apportioned in full to such concentrate regardless
of whether it is sold in an unchanged form or in a component
form.
According to respondent, section 936(h)(5)(C)(ii)(II)
governs all computations of combined taxable income and adopts a
facts-and-circumstances test for apportioning U.S. affiliates'
expenses to the gross income derived from covered sales of a
possession product regardless of the form in which the possession
product is sold.4 Congress mandated this approach, argues
respondent, by enacting language borrowed directly from section
861. Respondent argues that the phrase "properly apportioned or
allocated" is a term of art borrowed verbatim from section
861(b), and enactment of this particular phrase should be
4The term "covered sales" means sales by members of the
affiliated group (other than foreign affiliates) to persons who
are not members of the affiliated group or to foreign affiliates.
Sec. 936(h)(5)(C)(ii)(IV).
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