- 47 -
years.11
Computation of DISC Commission
The next issue that we consider is whether, in computing the
commission due CVI from CV for CVI’s taxable years ending January
31, 1983 and 1984, and December 31, 1984,12 using the 50 percent
of CTI method provided by section 994(a)(2) and (b), CV and CVI
are entitled to apportion net, rather than gross, interest
expense among their respective product lines.13 If net interest
expense is apportioned, the combined taxable income (CTI) of CV
and CVI will rise, increasing the commission payable to CVI and
therefore the amount of income on which tax is deferred under the
DISC provisions.
11
Our holding renders it unnecessary to address respondent's
determinations that, in the event CVI does not qualify as a DISC
during its relevant taxable years, the commission income CVI
received from CV for those years should be reallocated to CV
under sec. 482, or, in the alternative, that CVI is taxable on
its income for those years.
12
We note that CVI’s status as a DISC is not in dispute for
its taxable year ending Dec. 31, 1984.
13
The parties agree that, in the event we hold, as we have,
that CVI qualifies as a DISC for its relevant taxable years, that
the computation of the amount of commissions payable to CVI for
those years and the amount of CV’s deduction for those
commissions is governed by our decision in Computervision Corp.
v. Commissioner, 96 T.C. 652 (1991). The parties also agree that
a reduction of $876,993 is necessary in the adjustment reflecting
our holding in Computervision Corp. v. Commissioner, supra, that
respondent made in CV's deduction for DISC commissions payable to
CVI for CVI’s taxable year ending Dec. 31, 1984. Their agreement
is to be taken into account in the Rule 155 computation we order
below.
Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 NextLast modified: May 25, 2011