-4-
the other hand, respondent contends that where the taxpayer is an
affiliated group of corporations that files a consolidated income
tax return (such as petitioner in this case), the total "regular
tax deduction" allowed the group must equal "the taxes imposed by
chapter 1 of the Code and, in this regard, the tax imposed on the
affiliated group is the tax assessed against its consolidated
income." We agree with respondent's position.
Petitioner's Method of Allocation
For each of the years at issue, petitioner calculated the
minimum tax liability for each member of the group on a separate
entity basis. Each member's separate preference items were
calculated pursuant to section 57, and then the 15-percent minimum
tax rate was applied to the excess of each member's separate
preference items over the member’s regular tax deduction.
The regular tax deduction for each member was the amount of
regular tax liability allocated to that member pursuant to the
method set forth in section 1552(a)(2) and 1.1502-33(d)(2)(ii),
Income Tax Regs.2 The consolidated tax of the group was allocated
2 Sec. 1552 requires that in determining a member’s
earnings and profits for a particular year, the tax liability of
the group for such year must be allocated among the members
pursuant to one of several methods set forth in sec. 1552(a)((1)-
(4)) that is elected (pursuant to regulations prescribed by the
Secretary) in the first consolidated return filed by the group.
On its first consolidated return (which was filed for the 1971
tax year), petitioner elected to allocate the tax liability of
the group among its members in accordance with sec. 1552(a)(2)
and sec. 1.1502-33(d)(ii), Income Tax Regs.
(continued...)
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