108 T.C. No. 9
UNITED STATES TAX COURT
GENERAL DYNAMICS CORPORATION AND SUBSIDIARIES, Petitioner
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
GENERAL DYNAMICS FOREIGN SALES CORP., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 19202-94, 19203-94. Filed March 26, 1997.
P formed wholly owned corporations (one a DISC,
the other an FSC). P computed and reported its Federal
income using the completed contract method. P elected,
under sec. 1.451-3(d)(5)(iii), Income Tax Regs., to
annually deduct certain period costs. In computing the
base (combined taxable income) for the statutorily
conferred tax benefit to promote exports, P did not
account for period costs, which it had elected to
deduct annually in prior years. R determined that sec.
994 and/or 925, I.R.C., and the regulations thereunder,
required P to include prior years' period costs that
are attributable to the gross receipts from foreign
exports in computing the base for P's deferral or
exemption from income.
P manufactured specialized ocean-going vessels for
the transport of liquefied natural gas. Sec. 1.993-
3(d)(2)(i)(b), Income Tax Regs., requires that to
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