Norwest Corporation and Subsidiaries - Page 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.                                               

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