General Dynamics Corporation and Subsidiaries - Page 3

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          contract was a 48-month contract (multiyear) for delivery of 480            
          aircraft.  Respondent determined that 2034 should be treated as             
          four separate agreements, each for the delivery of 120 aircraft.            
               With respect to Government contract numbered F33657-82-C-              
          2038 (Contract 2038 or 2038), GENDYN allocated the income and               
          expenses to multiyear Contract 2034 so that Contract 2038 was               
          reported under the completed contract method for Federal income             
          tax purposes.  Respondent determined that the income and expenses           
          from 2038 were not part of the completed contract reporting for             
          Contract 2034.  Consequently, respondent also determined that               
          Contract 2038 should have been separately accounted for under the           
          accrual method of accounting.                                               
                                  FINDINGS OF FACT3                                   
               GENDYN was incorporated on February 21, 1952, and, at all              
          relevant times, was the common parent of a group of corporations            
          that filed consolidated corporate Federal income tax returns.  At           
          the time the petitions were filed in these cases, GENDYN's and              
          GENDYN/FOREIGN's principal places of business were in Falls                 
          Church, Virginia.  GENDYN engineered, developed, and manufactured           
          various products for the U.S. Government and, to a lesser extent,           
          foreign Governments, including military aircraft, missiles, gun             
          systems, space systems, tanks, submarines, and electronics, and             

               3  The parties’ stipulation of facts and exhibits are                  
          incorporated by this reference.                                             

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