-7-
1(b)(2), Income Tax Regs. In addition to the portion cited by
petitioner, section 1.1552-1(b)(2), Income Tax Regs., provides:
If the full amount of such liability is not paid by such
corporation, pursuant to an agreement among the members
of the group or otherwise, the amount which is not paid
will generally be treated as a distribution with respect
to stock, a contribution to capital, or a combination
thereof, as the case may be.
Respondent argues, and we agree, that section 1.1552-1(b)(2),
Income Tax Regs., involves the allocation of an intercompany
liability that is not the kind of tax liability contemplated by
section 56(c). Respondent also notes, and we also agree, that
under petitioner's methodology, the section 56(c) regular tax
deduction generally will exceed the amount of tax paid on the
consolidated taxable income of the affiliated group.
Deduction For Taxes Imposed
The "regular tax deduction" is defined in section 56(c) as an
amount equal to the "taxes imposed" by Chapter 1 of the Code. The
phrase "taxes imposed", in the context of the alternative minimum
tax for noncorporate taxpayers, was construed by this Court in
Sparrow v. Commissioner, 86 T.C. 929 (1986). Sparrow involved a
determination of the amount of "regular tax" to be used by
individual taxpayers in computing liability for the alternative
minimum tax under section 55. Like section 56(c), section 55(b)(2)
defined the "regular tax" as the amount equal to the "taxes
imposed". The taxpayers in Sparrow used income averaging to
determine the tax reported on their return, but did not do so in
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