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retail/fleet customers was not the corresponding item of income
to the rate support deductions; and (3) the discount income was
not earned in intercompany transactions.
A. The Matching Rule
As stated earlier, section 1.1502-13(b)(2), Income Tax
Regs., provided in part:
(2) Special rule. If, in an intercompany
transaction (other than a deferred intercompany
transaction), one member would otherwise properly
[take] an item of income or a deduction into account
for a consolidated return year earlier than the year
(whether consolidated or separate) for which another
member of the group can properly take into account the
corresponding item of income or deduction, then both
the item of income and the deduction shall be taken
into account for the later year (whether consolidated
or separate). * * *
In 1995, section 1.1502-13, Income Tax Regs., was amended to
state the following: "An item is a corresponding item whether it
is directly or indirectly from an intercompany transaction."29
Sec. 1.1502-13(b)(3)(i), Income Tax Regs., as amended; T.D. 8597,
1995-2 C.B. at 164.
29 The 1995 amendments are effective as of July 18, 1995,
and apply to transactions occurring in years beginning on or
after July 12, 1995. See T.D. 8597, 1995-2 C.B. 147, 185; sec.
1.1502-13(l)(1), Income Tax Regs., as amended. The 1995
amendments, therefore, are not before the Court.
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