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Internal Revenue Manual procedures during the examination in this
case.
During the examination, Ms. Hamilton was also auditing
another taxpayer that provided services similar to those provided
by petitioner, that is, selling the integrated circuit assembly
services of its foreign parent. The other taxpayer received a
commission rate ranging from 11 to 15 percent. The other
taxpayer had three separate divisions. Two of these divisions
were distributors of goods. The third division was similar to
petitioner in that it found customers for the integrated circuit
assembly services of the foreign parent. There was separate
accounting for each activity. The division which found customers
for the services of the foreign parent had no warehousing
expenses and no inventory.
To assist in her determination as to the appropriate amount
of petitioner's gross profit spread, Ms. Hamilton consulted with
an economist employed by respondent, Ron McGinley. During the
examination, Ms. Hamilton related to Mr. McGinley what
petitioner's representatives told her about petitioner's business
and what petitioner's functions were with respect to its sales.
Mr. McGinley provided Ms. Hamilton with information from the
examination of another taxpayer presenting an issue concerning
services rendered similar to that in petitioner's case. Mr.
McGinley advised Ms. Hamilton that, based upon the functions
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