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Commissioner, 86 T.C. 929 (1986).
In Sparrow, the taxpayers argued that the regular tax for
purposes of calculating their alternative minimum tax under section
55 was the tax that would have been imposed under section 1 and not
the lesser amount of tax that was actually imposed with the benefit
of the income averaging provisions of sections 1301-1305. This
Court stated:
section 55(b)(2) (now section 55(f)(2)) defines regular
tax as “the taxes imposed by this chapter for the taxable
year.” (Emphasis added.) “This chapter” is Chapter 1 of
Subtitle A of the Code. It encompasses sections 1 through
1397. Thus, the regular tax includes the taxes imposed by
sections 1 through 1397; in particular, the tax imposed by
section 1. However, section 1301 allows a taxpayer to
reduce the tax on averageable income thereunder. The
amount so determined under section 1301 thus becomes the
tax imposed by section 1. Sec. 1301 * * *. This figure
therefore is the regular tax and must be used in computing
the alternative minimum tax.
* * * Petitioners would have us read section 55(b)(2) (now
section 55(f)(2)) as defining regular tax as the tax
computed under section 1 regardless of the tax actually
imposed thereunder. This we cannot do. The statutory
language is “taxes imposed.” [Sparrow v. Commissioner,
supra at 934-935.]
Similarly, section 1.1502-2, Income Tax Regs., provides that
the tax liability of an affiliated group of corporations is
determined by adding together the taxes imposed under various
sections of chapter one of subtitle A of the Code on the group's
consolidated taxable income for the taxable year; the total of the
taxes so determined is equal to the taxes imposed on an affiliated
group under chapter one of subtitle A of the Code. No other taxes
are imposed on an affiliated group or any of its separate members
under chapter one of subtitle A of the Code. Therefore, the
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