Cite as: 537 U. S. 437 (2003)
Syllabus
sales of products in a broadly defined SIC category is not arbitrary. It provides consistent treatment for cost items used in computing the taxpayer's domestic taxable income and CTI; and its allocation of R&D expenditures to all products in a category even when specifically intended to improve only one or a few of those products is no more tenuous than the allocation of a chief executive officer's salary to every product that a company sells even when he devotes virtually all of his time to the development of the Edsel. Reading § 994 in light of § 861, the more general provision dealing with the distinction between domestic and foreign source income, does not support Boeing's contrary view. If the Secretary reasonably determines that Company Sponsored R&D can be properly apportioned on a categorical basis, the portion of § 861(b) that deducts from gross income "a ratable part of any expenses . . . which cannot definitely be allocated to some item or class of gross income" is inapplicable. Pp. 446-451.
(b) Boeing's arguments based on specific DISC regulations are also unavailing. Language in 26 CFR § 1.994-1(c)(6)(iii), part of the rule describing CTI computation, does not prohibit a ratable allocation of R&D expenditures that can be "definitely related" to particular export sales. Whether such an expense can be "definitely related" is determined by the rules set forth in the very rule that Boeing challenges, § 1.861-8. Moreover, the Secretary could reasonably determine that expenditures on model 767 research conducted in years before any 767's were sold were not "definitely related" to any sales, but should be treated as an indirect cost of producing the gross income derived from the sale of all planes in the transportation equipment category. Nor do §§ 1.994-1(c)(7)(i) and (ii)(a), which control grouping of transactions for determining the transfer price of sales of export property, and § 1.994- 1(c)(6)(iv), which governs the grouping of receipts when the CTI method is used, speak to the questions whether or how research costs should be allocated and apportioned. Pp. 451-455.
(c) What little relevant legislative history there is in this suit weighs in the Government's favor. Pp. 455-457.
258 F. 3d 958, affirmed.
Stevens, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Kennedy, Souter, Ginsburg, and Breyer, JJ., joined. Thomas, J., filed a dissenting opinion, in which Scalia, J., joined, post, p. 457.
Kenneth S. Geller argued the cause for petitioners in No. 01-1209 and respondents in No. 01-1382. With him on
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