- 16 - Ms. Hamilton prepared a "what if" scenario showing the resulting profit attributable to petitioner for gross profit spreads of 10 percent through 15 percent. In her report on Form 4665, Report Transmittal, Ms. Hamilton states, "Providing a commission [gross profit spread] in the upper range insures that the TP will report profits from its activities. In no case should the commission be reduced below 10 percent. Ten percent (10%) is the lowest commission which would result in profit (See What-if Scenario workpaper)." If the gross profit spread was below 10 percent there would be no tax liability. Ms. Hamilton testified that there would be no need to process the case if no additional tax liability would result. Ms. Hamilton was guided by temporary regulations under section 482 which indicated that ranges should be used, even though she believed the regulations did not apply retroactively. As a result of the examination and based upon the information she had, Ms. Hamilton determined that based on the additional functions petitioner performed, it should receive a gross profit spread above the average commission rate shown in the MANA Research Bulletin for sales services alone. For the additional services and functions, Ms. Hamilton determined that petitioner should be compensated an additional 5 percent above the average rate of approximately 10 percent as shown in the MANA materials.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011