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tests, a foreign tax meets the net income requirement
if, judged on the basis of its predominant character,
the base of the tax is computed by reducing gross
receipts to permit recovery of significant expenses
under a method that is likely to approximate or exceed
those expenses. Sec. 1.901-2(b)(4)(i)(B), Income Tax
Regs.
Held: Whether, judged by the predominant
character of the OMT, the processing allowance is
likely to approximate or exceed expenses related to
gross receipts which are nonrecoverable under the OMT
is a question of fact. Accord Texasgulf, Inc. v.
United States, 17 Cl. Ct. 275 (1989), modified per
order (Apr. 16, 1992).
Held, further, P has proven that, judged on the
basis of the predominant character of the OMT, the
processing allowance is likely to approximate or exceed
expenses related to gross receipts which are
nonrecoverable under the OMT. Inland Steel Co. v.
United States, 233 Ct. Cl. 314, 677 F.2d 72 (1982),
distinguished (sec. 1.901-2, Income Tax Regs., did not
apply).
Willard B. Taylor, Richard J. Urowsky, Michael Lacovara, C.
Barr Flinn, Ann T. Kenny, Jared M. Rusman, and Scott L. Lessing,
for petitioner.
Lewis R. Mandel, Monica E. Koch, and Christopher W. Shoen,
for respondent.
COLVIN, Judge: Respondent determined deficiencies in
petitioner’s Federal income tax of $563,127 for 1979, $10,998,770
for 1980, and $1,794,073 for 1981. The sole issue for decision
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