- 43 -
entitled to use CCM. So, the question here concerns whether, in
using CCM, petitioner correctly reported its income and
deductions from Contract 2034 after the completion and delivery
of the 480 contracted-for units or whether profit should be
segregated and reported on four separate occasions after the
completion and delivery of 120 units.
No question of law is presented, and we focus on whether the
facts and circumstances presented in this case are sufficient to
carry petitioner’s burden of showing that respondent's exercise
of regulatory discretion was arbitrary or capricious (i.e.,
without sound basis in law and/or fact).
2. Can Petitioner’s Profit Be Reasonably Estimated for Each
Program Year?
The regulations do not specifically require, as a condition
to severing a contract, that the taxpayer’s profit for the
severed period be determinable with reasonable accuracy. The
parties argue this point, however, as a threshold matter to the
question that must precede any consideration of severance. It
should be noted, however, that the ability to reasonably compute
the amount of profit or loss attributable to each annualized 120-
aircraft allocation, does not mean that the profit or loss
predicted for each severed year would ultimately result. In that
regard, petitioner contends that its profits for a severed period
were not reasonably determinable; e.g., due to the interdependent
pricing under the multiyear contract, petitioner could experience
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 NextLast modified: May 25, 2011