- 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
apply.
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 NextLast modified: May 25, 2011