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Supreme Court on 861

(originally launched into cyberspace on 02/07/2003)
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Dear List Subscribers,

There is currently a case before the Supreme Court that mentions Section
861. Before you get too excited, it's about the most boring issue you can
imagine. The only question is about how to properly allocate research and
development expenses for purposes of Domestic International Sales
Corporations (DISC). Yippee. (Watching grass grow is more thrilling than
reading the oral arguments in this case.) However, I thought I should look
it over to see if anything interesting shows up. And at least one thing
does.

The lawyer for one side points to 1.861-8(f)(1), the list of "specific
sources"--specifically to 1.861-8(f)(1)(iii), which deals with DISCs. He is
pointing out the rules there for that. The lawyer said that Congress made
it clear that they wanted the regulations under 861 to deal with this
particular rule for DISCs. Then a Supreme Court justice (I think it was
O'Connor) said this:

"But 861 applies generally, doesn't it, not just to DISCs?"

The lawyer said yes, it "applies generally" (but he was focusing on one part
of it in particular).

I wouldn't make too much of that, but it might make a few status quo
proponents cringe who like to say "that's only for certain people in special
situations." That doesn't sound like the same thing as saying the section
"applies generally."

Anyway, I expect the case, and the ruling, to be rather boring and not touch
on anything of particular interest to us on this list. But we shall see.

Sincerely,

Larken Rose
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