ASAT, Inc. - Page 41

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               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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Last modified: May 25, 2011