GROUPING DISC TRANSACTIONS
Grouping or combining transactions often increases DISC profits, but grouping is disadvantageous in other circumstances.1 Relatively few DISCs achieve the maximum benefits from grouping, as some DISCs fail to make advantageous combinations of transactions' while others aggregate their transactions in a disadvantageous manner.
Prerequisites for Grouping
The regulations contain specific grouping provisions.2 These pro-
visions are part of the special intercompany pricing rules. However,
the grouping rules generally apply to all three pricing methods:
4 percent of gross receipts3 50 percent of combined taxable income,4
and the arm's-length method.5
The primary benefits of grouping occur when the safe-haven intercompany pricing rules ( 4 percent of gross receipts or 50 percent
1. See Feinschreiber,
How to Aggregate DISC Sales to Make Most Effective Use of the
Deferral, 36 J. OF TAX. 300 (1972); Feinschreiber, The
"No-Loss Rule" Restricts DISC Profits, 1 DISCUSSION
2 (Dec. 1972); Feinschreiber, Introducing the DISC Pricing
Rules, U.S. TAX. OF INT'L OPERATIONS ~ 9515 ( 1975) ; Feinschreiber,
Maximizing DISC Profits Through Quantitative Pricing Techniques,
2 INT'L TAX J. 28 ( 1975) ; Feinschreiber, New Strategies
for Increasing DISC Benefits, 44 FIN. EXECUTIVE 32 ( 1976
).
2. Reg. §§ 1.994-1 (c) (7), 1.994-1 (d) (1 ), 1.994-1
(d) (3) (ii), 1.994-1 (e) (1) (ii), 1.994-2(c) (3). 3. §
994 ( a) ( 1 ) ; Reg, § 1.994-1 ( c ) ( 2) .
4. §994(a)(2);Reg,§1.994-1(c)(3),
5, §§ 482,994(a) (3); Reg. § 1.994-1 (c) (4).
