General Dynamics Corporation and Subsidiaries - Page 16

                                       - 16 -                                         
          controversy here.  For purposes of this case, the DISC and FSC              
          provisions are generally similar, and the parties do not argue              
          that the outcome should vary depending on which of the provisions           
               The focus here is whether petitioners must consider period             
          costs attributable to the gross receipts from export sales of the           
          foreign sales corporation, even though the period costs were                
          deducted in prior years.  There is a direct relationship between            
          the quantity of DISC income and the tax benefit available to a              
          domestic corporation under the DISC provisions.  The greater the            
          costs allocated to export sales, the lower the combined taxable             
          income attributable to the DISC or FSC, and thus the smaller the            
          tax deferral or exclusion.                                                  
               Ordinarily, taxpayers seek ways to reduce the amount of                
          their reportable income, such as by means of deductions.  In                
          computing combined taxable income (CTI) of a foreign sales                  
          corporation, however, taxpayers benefit where the amount of                 
          export sales is larger or maximized to take advantage of the                
          congressionally intended deferral or exclusion of income.  We are           
          therefore presented with the somewhat unusual circumstance where            
          petitioners argue that the amount of income should be larger, and           
          respondent argues it should be smaller.  Petitioners assert that            
          they should not be required to reduce CTI by the portion of their           
          costs that was deducted in prior years.                                     

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011