- 41 -
The important point to remember is that a commission
rate should be determined empirically to insure that
you and your agencies can make money--read profits.
It was not an abuse of the Commissioner's discretion under
section 6038A to assume that a fair gross profit spread is one
that would allow petitioner to make an overall profit.
Petitioner also argues that Ms. Hamilton erroneously
increased the gross profit spread beyond the base adjustment
(from 10 to 15 percent). However, petitioner admits that it
performed additional services for ASAT, Ltd. Given the latitude
mandated by section 6038A, we cannot say that the Commissioner
abused her discretion by increasing the base spread by 5-percent
for the additional services.
Even without the MANA survey, Ms. Hamilton's and the IRS
economist's experiences with similar taxpayers support a gross
profit spread in the 10 to 15-percent range, establishing that
the IRS's determination was not an abuse of discretion. We hold
that petitioner has failed to show a section 6038A abuse of
discretion in respondent's determination.
D. NOL
No NOL deduction is allowed since it was created using a 6-
percent gross profit spread.20 Petitioner admits that a 15-
percent gross profit spread in earlier years would eliminate its
NOL deduction.
20 Petitioner's gross profit spread for the 1990 tax year
appears to be zero.
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