Tax News

CCH (cch.taxgroup.com) reports:

  A domestic corporation's request for a redetermination of foreign sales corporation (FSC) commissions allocated to its wholly-owned FSC was properly denied because the FSC's assessment period was closed. The government's interpretation of
Temporary Reg. §1.925(a)-1T(e)(4), which required that the redetermination be filed while both the refund limitations period under Code Sec. 6511 and the Code Sec. 6501 assessment period is open with respect to both the FSC and its related supplier (the domestic corporation), was valid. The
Temporary Reg. §1.925(a)-1T(e)(4) requirement that a redetermination "shall affect" both the FSC and the related supplier necessarily refers to a meaningful tax effect.

  The "shall affect" language in the regulation was ambiguous; however, the government's interpretation of that language was entitled to deference because its interpretation was reasonable and was not inconsistent with any prior governmental interpretation. The government's inability to offset any refund paid to the corporation by assessing and collecting additional taxes from the FSC clearly would have prevented the redetermination from affecting both parties. The taxpayer's interpretation of the "shall affect" language as only requiring that the FSC and related supplier accurately reflect their income and expenses on their books would have rendered the "shall affect" language superflous.

  Affirming a FedCl decision, 2008-2 USTC ¶50,570.

Abbott Laboratories, CA-FC, 2009-2 USTC ¶50,525

Other References:

 
Code Sec. 925

  CCH Reference - 2009FED ¶28,163.60

 
Code Sec. 6511

  CCH Reference - 2009FED ¶39,080.2485

  Tax Research Consultant

  CCH Reference - TRC IRS: 36,052.05