- 10 -
You have not established that you qualify to elect the
profit split method under Internal Revenue Code Section
936(h) and the Income Tax Regulations thereunder.
Accordingly, your taxable income has been increased in
the amounts of $1,366,918.00 and $43,771,224.00 for the
taxable periods ending June 30, 1990, and June 30, 1991,
respectively.
After disallowing the profit-split method election, respondent
recomputed petitioner's combined taxable income deduction to be
$7,504,434 (rather than $51,275,658) by redetermining MS-Puerto
Rico's taxable income for 1991 pursuant to section 936(h)(1)-(4)
(the methods used for determining taxable income when the profit-
split method is not properly elected) and section 482 (the transfer
pricing rules).
Filing of the Petition and Answers
On August 5, 1996, petitioner filed a petition contesting
respondent's determinations that MS-Puerto Rico was not qualified
to elect the profit-split method. Respondent filed an answer to
the petition on October 8, 1996, denying any error with respect to
the determination that MS-Puerto Rico was not qualified to elect
the profit-split method. In the answer, respondent admitted that
the basis for the disallowance of the combined taxable income
deduction was MS-Puerto Rico's failure to satisfy the significant
business presence test.
On January 22, 1997, respondent filed a Motion for Leave to
Amend Answer. In the motion, respondent sought to raise the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011