Payless Cashways, Inc. and Its Subsidiaries - Page 2

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               credit relies on transition rules contained in TRA                     
               secs. 204(a)(7) (world headquarters rule) and                          
               203(b)(1)(C) (equipped building rule), 100 Stat. 2156,                 
                    Held:  In order for a taxpayer to have a “world                   
               headquarters” within the meaning of TRA sec. 204(a)(7),                
               a taxpayer must have substantial international                         
               operations which are directed from the headquarters.                   
               The existence of employees stationed outside the United                
               States, exports or foreign source income, liability for                
               foreign taxes, a foreign permanent establishment, and                  
               having foreign subsidiaries or foreign joint venture                   
               operations are all indicia of international operations.                
               P did not have any of these indicia in the year in                     
               question.  P’s importation of some merchandise for                     
               domestic sale and borrowing from banks and other                       
               lenders who participated in the international capital                  
               markets were not sufficient evidence of substantial                    
               international operations to characterize P’s                           
               headquarters as a “world headquarters” under TRA sec.                  
                    Held, further:  TRA sec. 203(b)(1)(C) (equipped                   
               building rule) requires the taxpayer claiming the                      
               investment tax credit to have a specific written plan                  
               and to have incurred or be committed to more than one-                 
               half of the total cost of the equipped building by Dec.                
               31, 1985.  P failed to establish that it had a specific                
               written plan, or that it had incurred or committed more                
               than one-half of the total cost of the equipped                        
               building before Jan. 1, 1986, as required by TRA sec.                  

               Frederick Brook Voght, Rhonda Nesmith Crichlow, David F.               
          Levy, Michael E. Baillif, and Rajiv Madan, for petitioners.                 
               Michael L. Boman, for respondent.                                      

               RUWE, Judge:  Respondent determined a deficiency in                    
          petitioners’ Federal income tax for their taxable year ending               
          November 29, 1986, in the amount of $240,298.  The deficiency               

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