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loan and volume purchase agreement. The Form 10-Q reported that
the portion of the gain attributable to the volume purchase
agreement ($1.4 million) had been accounted for as a favorable
purchase price variance and included in cost of goods sold.
OPINION
DISC Qualification Issue
The first issue that we address is whether CVI qualifies as
a DISC pursuant to section 992(a)(1)9 for each of its relevant
taxable years.
In Computervision Corp. v. Commissioner, 96 T.C. 652, 656
(1991), we stated:
In general, a corporation that qualifies as a DISC
9
Sec. 992(a)(1) provides as follows:
DISC.--For purposes of this title, the term “DISC” means,
with respect to any taxable year, a corporation which is
incorporated under the laws of any State and satisfies the
following conditions for the taxable year:
(A) 95 percent or more of the gross receipts (as
defined in section 993(f)) of such corporation consist of
qualified export receipts (as defined in section 993(a)),
(B) the adjusted basis of the qualified export assets
(as defined in section 993(b)) of the corporation at the
close of the taxable year equals or exceeds 95 percent of
the sum of the adjusted basis of all assets of the
corporation at the close of the taxable year,
(C) such corporation does not have more than one class
of stock and the par or stated value of its outstanding
stock is at least $2,500 on each day of the taxable year,
and
(D) the corporation has made an election pursuant to
subsection (b) to be treated as a DISC and such election is
in effect for the taxable year.
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