115 T.C. No. 17
UNITED STATES TAX COURT
MICROSOFT CORPORATION, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16878-96. Filed September 15, 2000.
During 1990 and 1991, petitioner engaged its wholly
owned subsidiary, a foreign sales corporation, to act as
its agent for the international sales of standardized
mass-marketed computer software products and computer
software masters. The standardized software products
were copyrighted articles sold without a right to
reproduce abroad. The software masters were licensed to
related foreign subsidiaries and unrelated foreign
equipment manufacturers with a right to reproduce abroad.
In the notices of deficiency, respondent allowed the
deductions for the foreign sales corporation commissions
attributable to the standardized software products but
denied them with respect to the export of the software
masters. The issue is whether the software masters
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