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revenue, cost of sales, operating expenses, and net income after
taxes as follows:3
1996 1997
Sales Revenue $22,041,000 $24,600,452
Cost of Sales 6,567,000 8,352,577
Operating Expenses 8,577,000 8,658,527
Net Income After Taxes 6,027,000 4,202,672
For 1996 and 1997, the respective yearend financial balance
sheets of petitioner, of Holdings LLC, of Operating LLC, and of
ADCS-Limited reflected cash assets as follows:
1996 1997
Petitioner $ 16,549 $ 7,876
Holdings LLC 12,582 11,623
Operating LLC 9,974 8,880
ADCS-Limited 3,545,495 5,212,451
Prior to the years in issue, ADCS had retained, and not
distributed to its individual shareholders, a cumulative total of
$9.7 million in earnings.
During petitioner’s 1996 and 1997 short taxable years in
issue, ADCS-Limited retained approximately $1.9 million and $2.9
million, respectively, in current earnings, and petitioner did
not distribute any retained earnings to shareholders.
Petitioner, however, did make distributions on behalf of its
3 The figures for 1996 for sales revenue, cost of sales,
operating expenses, and net income after taxes do not include
figures for ADCS-Korea as such figures were not included in the
record. The figures for 1997 reflect the figures for all of
petitioner’s affiliated companies and for ADCS-Korea.
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