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power supplies manufactured to specifications. Thus, petitioner
contends that an upward adjustment of 5 percent is appropriate to
make uncontrolled subcontractor power supply prices comparable to
that of Compaq Asia power supply prices. This adjustment would
increase the Compaq Asia aggregate power supply price by an
additional 5 percent.
The regulations also state that differences in the level of
the market at which purchases are made may impact price. See
sec. 1.482-2A(e)(2)(ii), Income Tax Regs.; see also Woodward
Governor Co. v. Commissioner, 55 T.C. 56, 66-67 (1970). In this
case, there is no difference in the level of the market. Compaq
Asia and unrelated subcontractors functioned as subcontractors to
Compaq U.S. Thus, no adjustment is necessary.
Definite and reasonably ascertainable adjustments are also
necessary if the geographic market in which the sales take place
has an effect on price. See sec. 1.482-2A(e)(2)(ii), Income Tax
Regs. Compaq U.S. subcontractors were primarily located in the
United States and sold "FOB plant". Compaq Asia was located in
Singapore and sold "FOB plant". While Compaq Asia and the
unrelated subcontractors sold their PCA's from different
locations, they all sold their products into the same market--
the United States. The PCA industry is global in nature, and
Compaq Asia competitors for Compaq U.S. business were located
primarily in the United States. Contrary to respondent's
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