Norwest Corporation and Subsidiaries - Page 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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