Robert A. Stanford and Susan Stanford - Page 12

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          1221(f), 100 Stat. 2554.  The repeal was based generally on                 
          Congress' belief that the chain deficit rule in section 952(d)              
          allowed U.S. taxpayers to shelter through CFC's excessive amounts           
          of tax haven income from current U.S. tax.  See H. Conf. Rept.              
          99-841, at 621-626 (1986), 1986-3 C.B. (Vol. 4) 473, 621-626.               
               In 1988, a new and revised chain deficit rule was enacted,             
          retroactive to any year ending after 1986.  Sec. 952(c)(1)(C);              
          Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L.            
          100-647, sec. 1012(i)(25)(A), 102 Stat. 3512.  The TAMRA version            
          of the chain deficit rule is the rule that governs in this case             
          for 1990.  The chain deficit rule, as enacted in 1988, provided             
          new restrictions on the use of deficits in earnings and profits             
          of CFC's to reduce subpart F income of profitable CFC's owned by            
          U.S. shareholders.                                                          
               In particular, under TAMRA, the new chain deficit rule                 
          provides that, in order to reduce subpart F income of profitable            
          CFC's by deficits in earnings and profits of unprofitable CFC's,            
          the profitable and unprofitable CFC's must satisfy a new                    
          "qualified chain member" rule and subpart F income of the                   
          profitable CFC's must be attributable to the same qualified                 
          activity to which deficits in earnings and profits of the                   
          unprofitable CFC's are attributable.  Sec. 952(c)(1)(B) and (C).            
               CFC's constitute qualified chain members under section                 
          952(c)(1)(C) only where the CFC's are related to each other                 
          directly or indirectly through a single, straight-line chain of             

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