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ruling on what other otherwise appears to be unqualified language
of a consolidated return regulation. The issue is not new to
this Court whose position has been rejected by two Courts of
Appeals. By way of background to our resolution of this judicial
conflict, we first turn to a description of the provisions in
respect of the investment tax credit pertinent to our analysis.
Section 47(a)(1) provided for recapture of the investment
tax credit:
If during any taxable year any property is disposed of,
or otherwise ceases to be section 38 property with
respect to the taxpayer, before the close of the useful
life which was taken into account in computing the
credit under section 38 * * * [3]
Section 47(b) further provided:
For purposes of subsection (a), property shall not be
treated as ceasing to be section 38 property with
respect to the taxpayer by reason of a mere change in
the form of conducting the trade or business so long as
the property is retained in such trade or business as
section 38 property and the taxpayer retains a
substantial interest in such trade or business.
Section 47 sets out two prongs for the "mere change in the
form" test--first, a continuing trade or business, and second, a
retained substantial interest. The transactions herein clearly
satisfy the continuing trade or business requirement. However,
3 Sec. 47(b)(2) provided an exception for certain types of
reorganizations which is not applicable herein (and the parties
do not argue otherwise) because the assets transferred to LOF
Glass, Inc., did not constitute substantially all of the assets
of petitioner. See Baicker v. Commissioner, 93 T.C. 316, 326
(1989).
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