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GENDYN owned 100 percent of GENDYN/DISC's sole class of voting
stock. GENDYN/DISC had no employees or business operations and
existed for the sole purpose of receiving commissions from
GENDYN. On the date of the incorporation, GENDYN and GENDYN/DISC
entered into an Export Sales Commission Agreement. On May 24,
1972, GENDYN/DISC elected to be treated as a domestic
international sales corporation (DISC) under section 992(b), and
it filed Federal income tax returns (Forms 1120-DISC) on the
basis of a fiscal year ended March 31.
GENDYN/DISC, through the period ended December 31, 1984,
reported the commissions it earned on GENDYN's sales of export
property based on the completed contract method of accounting in
accordance with section 1.993-6(e)(1), Income Tax Regs.
At the end of each year, commissions on export property
sales involving long-term contracts were deducted by GENDYN and
included in income by GENDYN/DISC in its appropriate taxable
period. Commissions were normally computed under the 50-50
combined taxable income method (50-percent method) provided for
2(...continued)
sales corporation and began use of a foreign sales corporation.
Although some differences exist between the two sets of statutory
provisions and the entities created to comply with the statutes,
for purposes of resolving the issues in this case we need not
make any distinctions. The foreign sales corporation became a
petitioner in these consolidated cases because it was the
surviving entity. Accordingly, the domestic international sales
corporation will be referred to as GENDYN/DISC and the foreign
sales corporation will be referred to as GENDYN/FSC. When
referred to generally, they will be referred to, along with the
other entities collectively, as petitioners.
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