- 21 -
by the excess of the company's total gross income,
$36,565,327, over its interest income, $1,784,106, or
$34,781,221, to arrive at the gross income ratio of 99.51
percent.
Thus, in computing the second gross income ratio for
North Sea Sun Oil Co. under section 1.861-8(e)(2)(vi),
Income Tax Regs., the ratio to be used if netting is
permitted, the interest income earned by North Sea Sun Oil
Co. during 1986 was subtracted from both the numerator and
the denominator of the fraction. The interest income
earned during 1986 by each of the other 14 members of
plaintiff's affiliated group was subtracted only from the
denominator of the fraction in computing the second gross
income ratio for each of those companies. We infer from
this that the interest income earned by North Sea Sun Oil
Co. in 1986 constituted gross income from sources without
the United States, whereas the interest income earned by
each of the other members of petitioner's affiliated group
for 1986 constitutes gross income from sources within the
United States.
The following schedule summarizes the revenue impact
of the position of each of the parties with respect to the
subject issue. It shows, based upon the parties'
stipulation, the aggregate interest expense apportioned to
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