General Dynamics Corporation and Subsidiaries - Page 2

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               generate qualified export receipts the export property                 
               must be used in foreign commerce prior to 1 year after                 
               its sale.  For reasons beyond P's control the vessels                  
               were not so used.  P contends that the regulation is                   
               not a proper interpretation of the statutory provision.                
                    Held:  Sec. 1.994-1(c)(6), Income Tax Regs.,                      
               interpreted to require P to reduce gross export                        
               receipts by related period costs even though P is                      
               permitted to elect to deduct those costs in years prior                
               to the combined taxable income computation.                            
                    Held, further, P's vessels are not qualified                      
               export property because they fail to meet the                          
               requirements of sec. 1.993-3(d)(2)(i)(b), Income Tax                   
               Regs.  Sim-Air, USA, Ltd. v. Commissioner, 98 T.C. 187,                
               190-197 (1992), followed in upholding the validity of                  
               the regulation.                                                        

               David C. Bohan, Richard T. Franch, James M. Lynch, Philip A.           
          Stoffregen, David D. Baier, Scott Schaner, Gregory S.                       
          Gallopoulos, and Debbie L. Berman, for petitioner in docket No.             
               David C. Bohan, James M. Lynch, Philip A. Stoffregen, and              
          David D. Baier, for petitioner in docket No. 19203-94.                      
               William H. Quealy, Jr., Alice M. Harbutte, Jeffrey A.                  
          Hatfield, Thomas C. Pliske, and William T. Derick, for                      

               GERBER, Judge:  General Dynamics Corp. and its consolidated            
          subsidiaries (GENDYN) (docket No. 19202-94) and its foreign sales           
          corporation, General Dynamics Foreign Sales Corp. (GENDYN/FSC)              
          (docket No. 19203-94), are petitioners in these consolidated                
          cases.  Respondent determined corporate income tax deficiencies             

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