108 T.C. No.6
UNITED STATES TAX COURT
TRINOVA CORPORATION AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2931-94. Filed February 27, 1997.
P, a corporation, filed a consolidated tax return
with its affiliated companies. P operated a division
with assets that included certain section 38 assets
upon which investment tax credits (ITC) had been
claimed. P transferred the division assets to a wholly
owned subsidiary, G. P agreed to transfer its shares
in G to another shareholder, H, in return for H's
shares in P. The two transactions qualified for
nonrecognition status under secs. 351, 355, and
368(a)(1)(D), I.R.C. R determined a deficiency for P's
failure to include ITC recapture in income under sec.
47(a), I.R.C., on its 1986 consolidated tax return,
relying on Rev. Rul. 82-20, 1982-1 C.B. 6. Sec.
1.1502-3(f)(2) and (3), Income Tax Regs., particularly
Example (5) thereof, provides for no recapture. Held:
Rev. Rul. 82-20, 1982-1 C.B. 6, is an unwarranted
attempt to limit the scope of the regulations; no ITC
recapture is includable in P's income.
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