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eliminating, use of PAL's, and (2) including section 1371(b)(1)
to narrow the liberalizing thrust of subchapter S generally, and
to prevent abuse by limiting, but not necessarily eliminating,
the ability of a corporation to utilize subchapter S status to
pass on its C status losses to its shareholders, see Rosenberg v.
Commissioner, 96 T.C. 451, 455 (1991).
Respondent's position is straightforward. Respondent
maintains that section 1371(b)(1) is clear on its face and that
the word "carryforward" in that section is not limited and
encompasses PAL's. Respondent argues that nothing in the
legislative history of either section 1371(b)(1) or 469 casts
doubt on respondent's position and that petitioner's attempts to
accord a narrow interpretation to the word "carryforward", both
directly and by interpolating section 469, are unavailing.
Petitioner's arguments fall into two categories: (1)
Suspended PAL's are not "carryforwards" within the meaning of
section 1371(b)(1), because the PAL rules, set forth in section
469, constitute an accounting method which St. Charles should
continue to use after its conversion to an S corporation; and (2)
pursuant to principles of statutory construction, the specific
language of section 469, particularly subsections (f)(2) and
(g)(1)(A), precludes the application of section 1371(b)(1).
Petitioner asserts that, unless it is permitted to utilize the
suspended PAL's in the year of disposition of the activities
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