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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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