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equal to 15 percent of the amount by which the sum of
the items of tax preference[16] exceeds the greater of--
(1) $10,000, or
(2) the regular tax deduction for the
taxable year (as determined under subsection
(c)).
* * * * * * *
(c) Regular Tax Deduction Defined.--For purposes
of this section, the term “regular tax deduction” means
an amount equal to the taxes imposed by * * * [chapter
one of subtitle A of the Code] for the taxable year
(computed without regard to this part and without
regard to the taxes imposed by sections 531 and 541),
reduced by the sum of the credits allowable under
subparts A, B, and D of part IV. * * *[17]
C. The Two Methods
1. UBC's Method
Under UBC's Method, which respondent contends is correct,
each member of the UBC affiliated group first determines its
separate “items of tax preference” pursuant to section 57. Then,
each member's separate items of tax preference are aggregated to
establish the UBC affiliated group's total for items of tax
preference (UBC's total preferences). That total is reduced by
the UBC affiliated group's regular tax liability (the amount that
should appear on Schedule J of its return) (UBC's consolidated
regular tax) or, if there is no such liability, the minimum tax
exemption.18 The 15 percent minimum tax rate of section 56(a) is
16 Items of tax preference are set forth in sec. 57.
17 The quoted provisions were in effect for the UBC affiliated
group's 1985 taxable year. For purposes of this case, prior
versions of sec. 56, in effect for 1977, 1980, and 1984, were not
materially different from the 1985 version.
18 This sentence reflects a stipulation of the parties. We
(continued...)
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