General Dynamics Corporation and Subsidiaries - Page 4

                                        - 4 -                                         
          increased credits be disallowed.  In addition, the engineer’s               
          1994 report reflected an amount that the engineer believed was              
          allowable if respondent was incorrect regarding the legal theory            
          for disallowance of the research credits attributable to fixed-             
          price Government contracts.  The 1994 notice of deficiency made             
          no reference to the increased credits claimed by petitioner.                
               At the time of the engineer’s 1994 report, the Government              
          was engaged in litigation with another taxpayer involving a                 
          substantially similar theory for disallowing research credits               
          attributable to fixed-price Government contracts.  At the time of           
          the issuance of the notice of deficiency and the filing of the              
          petition in this case, respondent’s legal approach had been                 
          approved by the Court of Federal Claims.  See Fairchild Indus.,             
          Inc. v. United States, 30 Fed. Cl. 839 (1994).  The decision in             
          Fairchild was on appeal during the pendency of this Court’s                 
          pretrial order.                                                             
               In its petition, petitioner claimed entitlement to the                 
          increased credits, and, in her answer, respondent denied that               
          petitioner was entitled to such credits.  In an October 1995                
          status report to the Court, respondent stated, concerning the               
          issue of whether petitioner was entitled to the increased                   
          credits, that “the parties expect to enter into stipulations                
          which establish the amounts of increase in petitioner’s R&E                 
          [research] Expenses for each period.  The issue will be whether             
          these R&E [research] Expenses were ‘funded’ by the contracts.”              




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011