General Dynamics Corporation and Subsidiaries - Page 3

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          for GENDYN in the amounts of $26,118,976 and $291,218,973 for its           
          1985 and 1986 taxable years, respectively.  With respect to                 
          GENDYN/FSC, respondent determined a $586,533 corporate income tax           
          deficiency for its 1986 taxable year.  Although these cases are             
          consolidated and related, for purposes of briefing and opinion              
          the issues have been divided into two generalized categories:               
          Domestic and foreign.  This opinion addresses the foreign issues.           
               The parties have settled some of the foreign issues, and the           
          following controversies remain for our consideration and                    
          decision:  (1) Whether in computing combined taxable income                 
          attributable to qualified export receipts under sections 9941 and           
          925 petitioners must, in addition to current year period costs,             
          deduct prior year period costs, as determined by respondent; and            
          (2) whether two liquefied natural gas tankers manufactured by               
          petitioner and sold to an unrelated third party for foreign use             
          constitute export property under section 993(c)(1) even though no           
          foreign use occurred during the first year and/or domestic use              
          occurred on one occasion prior to any foreign use.                          

                                  FINDINGS OF FACT                                    
               The parties have stipulated most of the facts bearing on the           
          foreign issues, and those facts are found and incorporated by               
          this reference.  GENDYN was incorporated on February 21, 1952,              

               1 Unless otherwise indicated, section references are to the            
          Internal Revenue Code as amended and in effect for the taxable              
          years in issue.                                                             

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