108 T.C. No. 11
UNITED STATES TAX COURT
ASAT, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3173-95. Filed March 31, 1997.
P, a wholly owned domestic subsidiary, purchased
assembly services from its parent, a foreign
corporation. During an IRS audit of P's 1991 Federal
corporate income tax return, the IRS notified P that it
would need to be appointed its parent's limited agent
under sec. 6038A(e)(1), I.R.C. P did not obtain the
authorization of agent before R issued a notice of
deficiency. Consequently, pursuant to sec.
6038A(e)(3), I.R.C., which grants the Commissioner the
authority to determine in her sole discretion the cost
of goods sold and deductions arising out of
transactions between a domestic corporation and a
related foreign corporation, R determined that P's cost
of goods sold should be decreased and eliminated a net
operating loss (NOL) carryforward which originated from
P's 1989 and 1990 tax years. In addition, R disallowed
P's deduction for consulting fees paid to an unrelated
domestic corporation and applied the accuracy-related
penalty.
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