- 12 -
outside the consolidated group. The consolidated
return regulations state that "[t]he Internal Revenue
Code, or other law, shall be applicable to the group to
the extent the regulations do not exclude its
application." Treas. Reg. � 1.1502-80 (emphasis
added). Revenue Ruling 82-20 is within the ambit of
such "other law." We accordingly believe that the two
rulings are not in conflict, and may consistently be
read together. Judge Freeh did not err when he viewed
the two rulings as alternatives and then chose Revenue
Ruling 82-20 based on EMC's intention "immediately" to
spin-off EC following the asset transfer. [Salomon,
Inc. v. United States, 976 F.2d at 842-843.]
Having thus adopted the Government's position based upon its
conclusion that Rev. Rul. 82-20, supra, was reasonable and
consistent with prevailing law, the Court of Appeals for the
Second Circuit declined to discuss whether the step transaction
doctrine as such would, in any event, apply. Salomon, Inc. v.
United States, supra at 843-844.
The final development in the scenario is the reversal of our
decision in Walt Disney Inc. v. Commissioner, supra, by the Court
of Appeals for the Ninth Circuit. Relying heavily upon Salomon,
Inc. v. United States, supra, the Court of Appeals for the Ninth
Circuit also concluded that Rev. Rul. 82-20, supra, and Example
(5) were consistent and agreed with the Court of Appeals for the
Second Circuit, with the further comment that Rev. Rul. 82-20
qualified as "other law" under section 1.1502-80, Income Tax
Regs. Walt Disney Inc. v. Commissioner, 4 F.3d at 741 n.10. The
Court of Appeals for the Ninth Circuit made no reference to the
step transaction doctrine.
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