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language of the restricted consent which did not expire until
December 31, 1996.
Respondent contends that the restricted consent encompasses
the recalculation of the combined taxable income of petitioner's
affiliated group. Respondent reaches this conclusion by noting
that the restricted consent makes reference generally to section
936(h), which includes the election of the profit-split method and
the calculation of the combined taxable income. Further, after a
dictionary analysis, respondent argues that the word "use" in
"Microsoft's use of the profit split method" (emphasis added)
refers both to MS-Puerto Rico's "act" of electing the profit-split
method and the "manner" in which the method is employed (i.e., the
calculation of the combined taxable income).
Petitioner argues that respondent fails to acknowledge the
critical language in the restricted consent, namely, the
"disallowance of Microsoft's use of the profit split method * * *
and any transfer pricing adjustments from such disallowance".
(Emphasis added.)5 Petitioner asserts that the word "disallowance"
5 Petitioner also argues that the language "the
disallowance of Microsoft's use of the profit split method * * *
and any transfer pricing adjustments resulting from such
disallowance" must be read in the conjunctive. In this regard,
petitioner contends that respondent's proposed adjustment to the
combined taxable income does not relate to a transfer pricing
adjustment. Respondent objects to petitioner's interpretation of
the restricted consent. We do not base our ruling on
petitioner's reading of the restricted consent in this respect
(continued...)
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