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MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: General Dynamics Corp. and its consolidated
subsidiaries (GENDYN) (docket No. 19202-94) and its foreign sales
corporation, General Dynamics Foreign Sales Corp.
(GENDYN/FOREIGN) (docket No. 19203-94), are the petitioners in
these consolidated cases. Respondent determined corporate income
tax deficiencies 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/FOREIGN, respondent determined a $586,533
corporate income tax deficiency for its 1986 taxable year. These
cases are consolidated and related for purposes of briefing and
opinion, and the issues have been divided into two generalized
categories: domestic and foreign. This opinion addresses the
domestic issues involving GENDYN.1
The issues for our consideration here pertain to GENDYN’s
accounting methods for Federal income tax purposes. With respect
to Government contract numbered F33657-82-C-2034 (Contract 2034
or 2034), the parties agree that GENDYN was entitled to use the
completed contract method.2 GENDYN reported the income and
related deductions based on the premise that its Government
1 See General Dynamics Corp. & Subs. v. Commissioner, 108
T.C. 107 (1997), for foreign issues.
2 For purposes of this case, references to the Government
are to the Federal Government as a party that contracted with
petitioners. We do not use the term “Government” to refer to
respondent.
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