General Motors Corporation and Subsidiaries - Page 54




                                        - 54 -                                         

          market rate of interest, the RISC's had face values of $10,000               
          and stated interest of $2,000.  See supra pp. 33-36.  Thus, if               
          GMAC held the below-market nonrate-supported RISC to maturity the            
          GM group made a $2,500 profit ($12,000 minus the $9,500 paid to              
          the independent GM dealer), or if the customer paid off the RISC             
          immediately the GM group made a $500 profit (the $10,000 of                  
          stated principal minus the $9,500 paid to the independent GM                 
          dealer).  Whereas, if GMAC held the rate-supported RISC to                   
          maturity the GM group made a $2,000 profit ($12,000 minus the                
          $10,000 paid to the independent GM dealer), or if the customer               
          paid off the RISC immediately the GM group made no profit (the               
          $10,000 of stated principal minus the $10,000 paid to the                    
          independent GM dealer).                                                      
               The purpose of the consolidated return regulations is to                
          provide rules so that the tax liability of a consolidated group              
          will be clearly reflected and to prevent the avoidance of such               
          tax liability.  See sec. 1502.  GM and GMAC have not fabricated a            
          transaction where numbers merely are being shuffled on paper                 
          without any real loss to the GM group.  The GM group's treatment             
          of the rate support deductions and the discount income clearly               
          reflected its tax liability.                                                 
               Based on the foregoing, we conclude that the discount income            
          was not the corresponding item of income to the rate support                 
          deductions.                                                                  





Page:  Previous  37  38  39  40  41  42  43  44  45  46  47  48  49  50  51  52  53  54  55  56  Next

Last modified: May 25, 2011