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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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