CTI, and the method for computing such, for purposes relevant here, however, is defined in Q&A-12. General language of a statutory provision will not be held to apply to a matter specifically dealt with in another part of the same enactment; specific terms prevail over the general. D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. at 208; Dupree v. United States, 391 F.2d 753, 758 (5th Cir. 1968).

Under the profit-split method, the electing corporation's taxable income derived from products produced in a possession equals 50 percent of the combined taxable income of the affiliated group derived from covered sales of these products. Sec. 936(h)(5)(C)(ii)(II). Combined taxable income is the gross income of the affiliated group derived from covered sales of the possession product less all expenses properly apportioned and allocated to such income.

Q&A-1 describes the proper allocation and apportionment of expenses in computing CTI with respect to soft-drink concentrate produced by CRI and sold by U.S. affiliates in unchanged form to unrelated bottlers. If, however, the possession product is simply a component of a final product, then Q&A-12 prescribes the manner of computing CTI.

Q&A-12 prescribes the method for determining CTI with respect to component products. Under that method, the expenses which the affiliated group allocated and apportioned to the integrated product, i.e., syrup and soft drink, must be further apportioned to the possession product, i.e., the soft-drink concentrate. The latter apportionment is based on the ratio of the production costs for the possession product to the total production costs for the integrated product.

In using this formulaic method to arrive at CTI, it becomes clear that the greater the expense allocation to the concentrate, the lower the CTI, and, thus, the smaller the credit. Conversely, the less the expense allocation to the concentrate, the higher the CTI, and, thus, the greater the credit. In the example in Q&A-12, the taxpayer's PCR is 80 percent. This is because the production costs incurred at the possessions level are high relative to total production costs. Petitioner, however, has relatively low PCR's with respect to its component product, which, as stated earlier, results in a quite favorable tax benefit. The use of a formula will cut both ways; it will be beneficial to some and not so beneficial to others. That is the intrinsic nature of formulas.

Essentially, respondent is arguing that, at each level, the application of the PCR impermissibly misapportions away from the component concentrate expenses that are known and admitted to be factually related to the concentrate, which in turn inflates the CTI figure, causing the sheltering of post-allocation income. We find that the focus of respondent's argument appears to center on the wisdom of the choice between two alternatives; i.e., a formulaic versus a fact-based approach, rather than on whether the choice made was a reasonable choice within a gap left open by Congress. Q&A-12 contains no mention of "factual relationships" or "economic consequences". It merely provides a formula used in calculating CTI in order to determine the amount of credit under section 936. There is no doubt and no dispute that (1) petitioner qualifies for the section 936 credit, and (2) CRI made a valid election to use the profit-split method under section 936.

Currently, in response to the instant case, the Commissioner has opened a new regulation project regarding the computation of CTI under section 936(h). The proposed regulation contains, again, a formulary rather than a factual approach attacking the issue from the income side as opposed to the expense side. The proposed regulation makes no mention of factual relationships or economic reality.

We find that Q&A-12 is clear on its face, and respondent's strained interpretation of the relationship between Q&A-1 and Q&A-12 is merely an attempt to persuade this Court to retroactively revise the regulation. Until the regulation is changed, reflecting the Commissioner's proposed amendments to Q&A-12, taxpayers are entitled to the tax benefit generated under Q&A-12.

Additionally, we find that the formulaic method prescribed in Q&A-12 is consistent with Congress' intent to encourage investment in U.S. possessions, and consequently, we find that Q&A-12 is not inconsistent with any stated congressional intent. Q&A-12 could have been written to require simply that expenditures be allocated and apportioned in a manner consistent with the rules set forth in section 1.8616, Income Tax Regs., but it was not.

The fact that other methods might also be reasonable, or even preferable, however, does not warrant our overturning a regulation which itself has a reasonable basis. Brown &

Root v. TVA, 681 F.2d 1313, 1316-1317 (11th Cir. 1982). Even presuming that we might disagree with the results of applying the PCR in the instant case, we would not substitute our own construction of the statute for that of the Secretary where the regulation implements the congressional mandate in a reasonable manner. See Florida Manufactured Housing Association, Inc. v. Cisneros, 53 F.3d at 1572-1573. Respondent may not ignore the requirements set forth in the plain language of the regulations any more than petitioner or other taxpayers. Intel Corp. & Consol. Subs. v. Commissioner, 100 T.C. at 630.

We cannot conclude that the regulation at issue presents an impermissible construction of section 936(h). The Commissioner was delegated the authority to make choices among reasonable alternatives in interpreting section 936(h) and did

So.

After considering the regulation in light of the language of section 936(h) and the purpose behind it, we are satisfied that section 1.936-6(b)(1), Q&A-12, Income Tax Regs., constitutes a valid exercise of the Secretary's regulatory authority. We conclude that Q&A-12 is the controlling provision in the instant case.

E. Exxon

Respondent argues in the alternative that this Court's opinion in Exxon Corp. v. Commissioner, 102 T.C. 721 (1994), provides an independent basis for denying the instant motion as the application of Q&A-12 to the facts of the instant case would cause absurd results. Petitioner, citing Abdalla v. Commissioner, 647 F.2d 487, 497 (5th Cir. 1981), affg. 69 T.C. 697 (1978), contends that the plain and unambiguous meaning of a provision may be overridden only in rare and exceptional circumstances where the result of giving the provision its plain and unambiguous meaning would be so absurd as to "shock the general moral or common sense" and be against clear legislative intent.

Petitioner argues that respondent's reliance on Exxon Corp. v. Commissioner, supra, is misplaced, and that respondent is essentially asking this Court to rewrite the applicable regulations. We agree. We find that Exxon Corp. is distinguishable from the instant case.

Exxon received a known and quantifiable amount of income from sales of natural gas in 1979. Exxon claimed a 22-percent depletion allowance on an amount larger than the actual sales proceeds from that gas. This larger amount against which the depletion allowance was taken was derived from determining gross income under the "representative market” or “field price" method under the regulations. The issue in Exxon Corp. was the method of computing "gross income from the property" for purposes of the depletion allowance. See sec. 613(a). The statute itself was silent on this issue. The regulation defined gross income in terms of the representative market or field price, which in that case produced hypothetical gross income far in excess of actual gas sales.

The Commissioner argued that Exxon was not entitled to a percentage depletion deduction based upon a hypothetical "gross income from the property", which exceeded Exxon's actual gross income from the sale of gas. The Commissioner maintained that the "gross income from property", for purposes of percentage depletion, must not exceed the actual gross income from the sale of gas, and under those circumstances, the Commissioner was entitled to employ a netback methodology in determining "gross income from the property". Exxon argued that under the plain meaning of section 1.613-3(a), Income Tax Regs., it was required to compute its percentage depletion deduction by using the representative market or field price of the gas.

Section 611 allows a "reasonable allowance for depletion" in the case of oil and gas wells "according to the peculiar conditions in each case". Section 613(a) provides for a percentage depletion deduction based upon a percentage of a taxpayer's "gross income from the property". Section 611(a) provides that reasonable depletion allowance in all cases is to be made under regulations prescribed by the Secretary.

Although the statute was silent as to the definition of "gross income from the property" as it related to the facts in Exxon Corp. v. Commissioner, supra, section 1.613-3(a), Income Tax Regs., provided that "gross income from the property" is:

the amount for which the taxpayer sells the oil or gas in the immediate vicinity of the well. If the oil or gas is not sold on the premises but is

manufactured or converted into a refined product prior to sale, or is transported from the premises prior to sale, the gross income from the property shall be assumed to be equivalent to the representative market or field price of the oil or gas before conversion or transportation.

Exxon argued that, under the literal terms of section 1.613-3(a), Income Tax Regs., where the gas is transported from the premises prior to sale, the Commissioner cannot use a net-back methodology to determine gross income from the property.

The Commissioner argued that not only was Exxon's interpretation of the regulation at issue flawed, it also was inconsistent with the legislative history behind percentage depletion. Exxon essentially argued that, under the ordinary or plain meaning rule, the literal terms of the regulation at issue must be followed without further analysis.

We held that the rules of statutory construction require us to determine whether the "plain meaning" of a regulation would have a nonsensical result. Exxon Corp. v. Commissioner, supra at 728. We held further that the plain meaning rule does not preclude an examination behind the literal terms of the language at issue if the lack of such an examination would compel an odd result. Exxon Corp. v. Commissioner, supra at 728 (citing Public Citizen v. United States, 491 U.S. 440, 454 (1989)).

We examined the legislative purpose and history of percentage depletion to ascertain whether and to what extent the statutory framework was consistent with a literal interpretation of the regulation at issue. In so doing, we found that the plain meaning of the regulation, as applied to the facts before us in Exxon Corp., was against clear and longstanding congressional intent.

Accordingly, we found that in computing allowance for percentage depletion, it was unreasonable for Exxon to determine its 1979 "gross income from the property" for sales of natural gas, after the gas was transported away from the wellhead, by the method provided for in the last sentence of section 1.613-3(a), Income Tax Regs., the representative market or field price method, where those prices resulted in a "gross income from the property" five times Exxon's actual contract sales revenue.

In the instant case, however, the only clear and consistent congressional intent expressed with respect to the possession