- 39 -
Petitioner relies heavily on the Opinion of this Court
in Bowater, Inc., & Subs. v. Commissioner, 101 T.C. 207
(1993), revd. 108 F.3d 12 (2d Cir. 1997), involving the
same issue, viz, whether a taxpayer may offset interest
income and interest expense in determining the amount of
the interest deduction to be allocated and apportioned
under section 1.861-8(e)(2), Income Tax Regs. In that
case, the issue arose in the context of computing the
combined taxable income (CTI) of the taxpayer and its
domestic international sales corporation (DISC)
attributable to qualified export receipts derived from the
sale by the DISC of export property. See Bowater, Inc.,
& Subs. v. Commissioner, supra. Generally, in computing
CTI attributable to qualified export receipts, expenses are
to be allocated and apportioned in a manner consistent with
the rules set forth in section 1.861-8, Income Tax Regs.
Sec. 1.994-1(c)(6)(iii), Income Tax Regs. In Bowater,
Inc., & Subs. v. Commissioner, supra, we held that interest
expenses can be offset by interest income before the
net interest expense is apportioned under section 1.861-
8(e)(2), Income Tax Regs. Id.
Petitioner argues that we should follow Bowater, Inc.,
& Subs. v. Commissioner, supra, in the instant case, as we
have on two prior occasions, Coca Cola Co. v. Commissioner,
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