Robert A. Stanford and Susan Stanford - Page 16

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               The portion of the regulations on which petitioners rely               
          (namely, sec. 1.952-1(d)(2)(ii), Income Tax Regs.) and which is             
          inconsistent with section 952(c)(1)(C)(ii), as amended in 1988              
          and as applicable to 1990, is not applicable to years such as               
          1990 for which the new TAMRA chain deficit rule is applicable.              
          This portion of the regulations construes the prior law and has             
          not been amended to take account of the new chain deficit rule.             
          The statutory language of section 952(c)(1)(C) expressly                    
          disqualifies as “qualified chain members” CFC’s that are related            
          to each other through a common parent corporation (i.e., that are           
          related as brother/sister corporations).                                    
               With regard to deficits in earnings and profits of Stanford            
          Financial, respondent acknowledges that Guardian Bank and                   
          Stanford Financial, as subsidiary/parent corporations, qualify as           
          members of a "qualified chain" under section 952(c)(1)(C)(ii), as           
          enacted by TAMRA and as applicable to 1990.  Respondent also                
          acknowledges that the subpart F income of Guardian Bank                     
          constitutes foreign personal holding company income and that                
          Guardian Bank constitutes a qualified financial institution                 
          because Guardian Bank was actively engaged in the activity of               
          banking and financing under section 952(c)(1)(B)(iii)(VI) and               
          952(c)(1)(B)(vi).  Respondent argues, however, that Stanford                
          Financial was not also engaged in the banking, financing, or                
          similar business, but in the management business.                           

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