Partnership Seeks Readjustments in Production Activities Case

a. Adjusted Print Media's “domestic production gross receipts” (“DPGR”) and “qualified production activities income” (“QPAI”) to zero;

b. Decreased Print Media's DPGR by $438,868,226;

c. Decreased cost of goods sold allocable to DPAD by $160,606,203;

d. Decreased Print Media's “Selling, General and Administrative” or “SG&A” expenses allocable to DPGR by $156,104,245;

e. Decreased Print Media's “Single Category Assets — DPGR” used in the calculation of Print Media's DPAD by $196,853,502; and

f. Decreased Print Media's interest expense used in the calculation of the DPAD by $22,671,136.

a. the Directories (as defined below) were “manufactured” or “produced” by Print Media within the meaning of Code section 199; and

b. it meets all of the requirements for determining QPAI under Code section 199, and that Print Media may pass QPAI through to its partners.

a. Print Media received gross receipts from the sale of advertisements to third-parties placed in the “Yellow Pages” telephone directories published by Print Media (the “Directories”).

b. Print Media distributed the Directories to residents and businesses for no charge.

c. The Directories were in a tangible, printed form.

d. Print Media designed and caused the Directories to be printed in the United States.

e. Print Media developed and created the Directories (including designing the content and layout of the advertisements), paginated the Directories, created and printed proof pages, and exercised quality control over the entire production process of the Directories.

f. Print Media printed, bound, and shrink-wrapped the Directories using the services of a third-party, contract printer (the “Printer”).

g. Print Media provided the Printer with the design, layout, content, and listings for the Directories, which consisted of paper positives, film positives, film negatives, and electronic data storage.

h. Print Media contracted and purchased the paper on which the Printers printed the Directories from paper suppliers.

i. Print Media warranted that the paper supplied to the Printers was free from defects in material and workmanship, and conformed to Print Media's specifications.

j. Print Media's labor and overhead costs, exclusive of the costs paid to the Printer for printing and binding, were greater than 20 percent of its cost of goods sold.

k. At all times during the printing process, Print Media owned and had legal title to the paper, work-in-progress, and the Directories.

l. At all times, title and ownership of the intellectual property associated with the Directories (including paper positive, film positives, film negatives, and electronic data storage) remained with Print Media during the entirety of the printing process, and never passed to the Printer.

l. No sales tax was collected by or imposed on the Printer with respect to the work-in-progress or the Directories.

m. At all times, Print Media controlled the development of the content, design, and layout of the Directories.

n. At all times, Print Media controlled the creation of the Directories (including instructed the Printer on how to print the Directories).

o. At all times, Print Media determined all specifications for the printing process, including the grade, color, and quality of the paper used.

p. The Printer printed the Directories only according to Print Media's specifications and instructions.

q. Print Media had the right to and did inspect the Directories during the printing process, and it performed quality review of the Directories as they were being printed, including using a “Directory Quality Scorecard” to measure and monitor the production and delivery accuracy.

r. Print Media was responsible for the production schedule, and if the Printer could not meet the production schedule, Print Media could approve the use of overtime for which it was liable to pay.

s. Print Media, and not the Printer, bore all risk for fluctuations in the cost of the paper.

t. Indeed, paper was the predominant raw material used in the creation of the Directories.

u. Print Media bore all risk for fluctuations in the cost of all other manufacturing materials and supplies, including, but not limited to the glue, ink, and shrink wrap.

u. Because it owned and was at risk for the Directories during the printing process, Print Media was a named beneficiary under the terms of the Printer's casualty insurance policies with respect to the Directories.

v. The Printer's risk of loss, if any, consisted primarily of any labor inefficiency and a portion of its overhead costs.

w. Print Media's contract with the Printer had the characteristics of a cost-plus arrangement, and was not contingent or dependent upon how many advertisements Print Media sold.

x. Print Media's contract with the Printer separately stated the costs of labor, ink, glue, and shrink wrap used to print the Directories.

y. Print Media's contract with the Printer was only for printing services and was not a contract to purchase the Directories.

z. The printing services fee that Print Media paid to the Printer was not based on the value of the Directories or the amounts Print Media earned from selling advertisements.

aa. The Printer had no right to use, alter, sell, distribute, or dispose of the Directories or any of their content, and did not acquire any rights to the Directories by virtue of performing its printing services for a fee.

bb. Only Print Media, and not the Printer, had the right to exploit the Directories and the intellectual property associated with them.

cc. Print Media paid and was responsible for all taxes levied and assessed, including property taxes, on the Directories.

dd. Only Print Media, and not the Printer, had the “benefits and burdens of ownership” of the Directories throughout the production process — during the period of their creation, production, and distribution.

(1) Redetermine the adjustments proposed by the Commissioner in the FPAA;

(2) Determine that the adjustments in the FPAA should not be made to the partnership items reported on the Print Media's Federal tax return for the 2015 Tax Year;

(3) Make all necessary correlative adjustments; and

(4) Grant Petitioner such other further relief to which it may be entitled.