St. Charles Investment Co., Burton C. Boothby, Tax Matters Person - Page 13

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          from the provisions dealing with accounting matters.  Compare               
          title V entitled "Tax Shelter Limitations; Interest Limitations",           
          which includes the provisions of section 469, with title VIII               
          "Accounting Provisions" of the Tax Reform Act of 1986, Pub. L.              
          99-514, 100 Stat. 2085, 2233-2249, 2345-2375; H. Conf. Rept. 99-            
          841 (Vol. II), supra, 1986-3 C.B. (Vol. 4) at 134, 285.                     
               We are not impressed by petitioner's attempt to reinforce              
          the "method of accounting" argument that PAL's should not be                
          treated in the same fashion as NOL's under section 1371(b)(1) by            
          pointing to the fact that the regulations under section 469                 
          disallow ratably the deductions which enter into the                        
          determination of whether the taxpayer has incurred a PAL.  The              
          regulations upon which petitioner bases this argument provide:              
                    (ii)  Allocation within loss activities--(A)  In                  
               general.  If all or any portion of a taxpayer's loss                   
               from an activity is disallowed under paragraph                         
               (f)(2)(i) of this section for the taxable year, a                      
               ratable portion of each passive activity deduction                     
               (other than an excluded deduction (within the meaning                  
               of paragraph (f)(2)(ii)(B) of this section)) of the                    
               taxpayer from such activity is disallowed.  * * *                      
                        *     *     *     *     *     *     *                         
                    (iii)  Separately identified deductions.  In                      
               identifying the deductions from an activity that are                   
               disallowed under this paragraph (f)(2), the taxpayer                   
               need not account separately for a deduction unless such                
               deduction may, if separately taken into account, result                
               in an income tax liability for any taxable year                        
               different from that which would result were such                       
               deduction not taken into account separately.  * * *                    
               [Sec. 1.469-1T(f)(2), Temporary Income Tax Regs., 53                   
               Fed. Reg. 5706 (Feb. 25, 1988); emphasis added.]                       

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