General Dynamics Corporation and Subsidiaries - Page 21

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          computing CTI as used during the taxable year for which CTI is              
          being computed.  Sec. 1.994-1(c)(6)(i), Income Tax Regs.                    
               The term "total costs" is ambiguous and does not delineate             
          whether the "total" is for the year, as petitioners contend, or             
          all costs relating to the gross receipts, including those                   
          incurred and deducted in a prior year.  Accordingly, petitioners            
          and respondent are both placed in the position of advancing, for            
          purposes of this litigation, their respective interpretations of            
          the language of the regulation.                                             
               Normally, we defer to regulations which “implement the                 
          congressional mandate in some reasonable manner.”  United States            
          v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982) (quoting United             
          States v. Correll, 389 U.S. 299, 307 (1967)); Rowan Cos., Inc. v.           
          United States, 452 U.S. 247, 252 (1981); National Muffler Dealers           
          Association, Inc. v. United States, 440 U.S. 472, 476 (1979).7              

               7  The deference given to a regulation depends on the source           
          of authority under which the Secretary promulgated it.  Less                
          deference is given to a regulation promulgated under the general            
          authority of sec. 7805(a), an interpretative regulation, and                
          greater deference to a regulation promulgated under a specific              
          statutory grant of authority, a legislative regulation.  United             
          States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982).                     
               Pursuant to sec. 994(b)(1), the Secretary issued sec. 1.994-           
          1(d), Income Tax Regs., which subjects commission DISC’s to the             
          pricing rules set forth in sec. 994(a).  See sec. 1.925(a)-1T(d),           
          Temporary Income Tax Regs., 52 Fed. Reg. 6447 (Mar. 3, 1987).               
          Sec. 1.994-1(d)(2), Income Tax Regs., refers to par. (c) of that            
          regulation for the proper method to apply the pricing rules.                
          However, that reference may not automatically make par. (c) a               
          legislative regulation when applied to commission DISC’s.                   
          Congress did not specifically grant the Secretary authority to              
          promulgate regulations with regard to buy-sell DISC’s.                      

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