ASAT, Inc. - Page 12

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               Petitioner did not make available to respondent any                    
          advertising copy, press releases, brochures, videos, or other               
          documents distributed to third parties concerning the services              
          offered by either petitioner or ASAT, Ltd., during the years                
          ending April 30, 1989, through April 30, 1992.                              
               During the examination, Ms. Hamilton requested information             
          regarding how petitioner's gross profit spread was set on sales             
          of ASAT, Ltd.'s, assembly services.  Neither petitioner nor ASAT,           
          Ltd., provided any documentation to Ms. Hamilton regarding how              
          petitioner's gross profit spread was set on sales of ASAT,                  
          Ltd.'s, assembly services.  Petitioner did not provide Ms.                  
          Hamilton with any information as to which company, petitioner or            
          ASAT, Ltd., set the gross profit spread.                                    
               During the examination, petitioner did not provide                     
          respondent with any documentation on petitioner's anticipated               
          costs, profits, or break-even points from its transactions with             
          ASAT, Ltd.  We cannot tell whether this information was not                 
          available or was not in existence.  Petitioner did not provide              
          Ms. Hamilton with an analysis or projection of income or expenses           
          for petitioner.  Petitioner did not know what commission rate it            
          would need to charge ASAT, Ltd., in order to be profitable.                 
               D.   Application of Section 6038A                                      
               The Internal Revenue Manual provides procedures for the use            
          and application of section 6038A.  Ms. Hamilton followed the                






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