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produced and/or provided other miscellaneous goods and services.
GENDYN was also involved in other business activities, including
the design, engineering, and manufacture of commercial aircraft;
the mining of coal, lime, limestone, sand, and gravel; the
manufacture and sale of ready-mix concrete, concrete pipe, and
other building products; production of commercial aircraft
subassemblies; the design, engineering, and manufacture of
commercial space launch vehicles; and shipbuilding.
GENDYN, for the taxable years 1977 through 1986 (concerning
the contracts under consideration), used the completed contract
method (CCM) for reporting Federal income tax and the percentage
of completion method for its financial accounting purposes. In
1976, GENDYN applied to respondent for permission to change its
accounting method to the completed contract method for reporting
income from its long-term contracts for all of its divisions.
GENDYN advised respondent that CCM would not be used for
financial reporting purposes. In 1977, respondent approved
GENDYN's use of CCM for all its long-term contracts.
During 1980, an Internal Revenue Service examining agent
challenged GENDYN's use of CCM. The agent submitted a request
for a technical advice memorandum to respondent's National
Office. The agent argued, inter alia, that GENDYN's use of CCM
resulted in the unreasonable deferral of income. In a technical
advice memorandum released in 1983, the National Office rejected
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