- 68 -
in no separate regular tax deduction for such members with
separately computed items of tax preference; (2) the separately
computed items of tax preference are not aggregated on a
consolidated basis; and (3) the aggregate amount allocated under
the 1502-33(d) allocation to members with positive taxable income
may exceed the consolidated regular tax liability of the group.20
D. Analysis
1. Issue
The issue is whether petitioner is entitled to refunds of
payments made to satisfy the UBC affiliated group's corporate
minimum tax liabilities for the years in issue.
20 That description of the consequence of petitioner’s method
is based on a stipulation of the parties. We find it somewhat
confusing. We believe that the primary reason that the aggregate
of the amounts allocated under the 1502-33(d) allocation may
exceed the consolidated regular tax liability of the group is
sec. 1.1502-33(d)(2)(ii)(b), Income Tax Regs., which allows for
an allocation of additional amounts no greater than the excess of
the separate return tax liability over the amount allocated in
accordance with the ratio of separate return tax liability to the
aggregate thereof for the group. For example, assume the
following: (1) The consolidated group comprises A, B, and C;
(2) A has taxable income of $100, B has taxable income of $100,
and C has a loss of $40; and (3) the regular tax rate is
35 percent. The consolidated regular tax liability would equal
$56 (35 percent of $160 (consolidated regular taxable income)).
Under petitioner's method, both A and B would be allocated
50 percent of that amount because the ratio under sec. 1.1502-
33(d)(2)(ii)(a), Income Tax Regs., for both is $35:$70, see sec.
1.1552-1(a)(2), Income Tax Regs., (we assume that the separate
return tax liability of the loss corporation is zero; if
negative, then A & B's ratios would only increase, resulting in
greater initial allocations to A & B anyway); thus both A and B
are allocated $28. But sec. 1.1502-33(d)(2)(ii)(b), Income Tax
Regs., allows an allocation of an additional amount that is no
greater than $7 ($35 - $28), which could result in a total
allocation to A & B of $70. Seventy dollars is greater than the
consolidated regular tax liability of $56.
Page: Previous 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 NextLast modified: May 25, 2011