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(namely, Stanford Financial), which relationship, respondent
argues, is expressly excluded from the definition of a qualified
chain.
Petitioners' argument that Guardian Bank and Guardian
Services qualify under the chain benefit rule of section
952(c)(1)(C) turns largely on one word in section
952(c)(1)(C)(ii). As indicated above, the cited statutory
language makes reference to "the" common parent, and petitioners
argue that the language "the" common parent should be construed
to mean "the U.S. shareholders", not the foreign parent
corporation (namely, not Stanford Financial).
Petitioners also rely on Treasury regulations applicable to
the prior version of section 952, and thus applicable through the
end of 1986, that have never been declared obsolete and that
permitted the use of deficits in the earnings and profits of
CFC's to reduce subpart F income of sister CFC's.
We believe the statutory language to be clear. In the
instant case, Guardian Bank and Guardian Services are related to
each other as brother/sister corporations only through Stanford
Financial, the common parent. Consequently, Guardian Services
does not constitute a "qualified chain member" with respect to
Guardian Bank, and petitioners are not permitted to use deficits
in earnings and profits of Guardian Services to reduce subpart F
income of Guardian Bank.
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