- 19 - presence (POPs).12 The purpose of the agreement was to provide connectivity to the POPs. 8. MCI Swaps On April 3, 1995, Qwest entered into a letter agreement with MCI for construction/conduit swaps in Santa Barbara, San Jose, Sacramento, and St. Louis. IV. Qwest’s Incremental Cost Allocation Method During the years in issue, petitioners used an accrual method of accounting for tax purposes. In most cases, petitioners reported income from their customer contracts using the percentage of completion method. Because Qwest was engaged in the simultaneous installation and sale of conduit or fiber to third-party customers and the installation and retention of additional conduits or fibers for its own potential future sale or use, Qwest allocated total project costs between the third-party contracts and the retained assets using an incremental cost allocation method. Qwest developed the incremental cost allocation method in part by looking at third-party subcontractors’ bids to install conduits. Bids to install only one conduit, when compared to the bids to install multiple conduits, indicated that the third-party subcontractors increased the bid on an incremental basis as more 12 A POP is the point at which a line from a long-distance carrier connects to the line of the local telephone company or to the user if no local telephone company is involved.Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
Last modified: May 25, 2011