Hughes Int'l Sales Corp. v. Commissioner
United States Tax Court
R determined that P did not qualify as a DISC and was required to pay income tax on its commission income. R contends that P failed to meet the 95-percent gross receipts requirement of sec. 992(a)(1)(A), I.R.C., because sec. 1.993-6(e)(1), Income Tax Regs., required P to use its related supplier's method of accounting. P contends that the regulation is invalid.
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R determined that P did not qualify as a DISC and was required to pay income tax on its commission income. R contends that P failed to meet the 95-percent gross receipts requirement of sec. 992(a)(1)(A), I.R.C., because sec. 1.993-6(e)(1), Income Tax Regs., required P to use its related supplier's method of accounting. P contends that the regulation is invalid. Held: Sec. 1.993-6(e)(1), Income Tax Regs., to the extent that it requires a DISC to use its related supplier's method of accounting in computing qualified export receipts and gross receipts, is invalid.
1ConcurrenceRuwe, J.
I agree with the result reached by the majority; however, I would reach that result by applying the literal terms of section 1.993-6(e)(2), Income Tax Regs.
It is clear that HISC erroneously received commissions on some of Hughes’ domestic sales even though, under the commission agreement between HISC and Hughes, HISC was only entitled to commissions on export sales. This situation and its effect on the 95-percent gross receipts requirement of section 992(a)(1)(A) is explicitly addressed by section 1.993-6(e)(2), Income Tax Regs., which provides:
If the commission arrangement provides that the…
2Cases cited2 opinions
- Gehl Company v. Commissioner of Internal RevenueCourt of Appeals for the Seventh Circuit · 1986
- Rocky Mountain Associates International, Inc. v. CommissionerUnited States Tax Court · 1988