Robert A. Stanford and Susan Stanford - Page 15

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          (namely, Stanford Financial), which relationship, respondent                
          argues, is expressly excluded from the definition of a qualified            
               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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