Interlake Corporation - Page 10

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          short-year, and that the entire CNOL is attributable to Acme in              
          accordance with section 1.1502-79(a)(3), Income Tax Regs.4                   
          Several consequences arise from the Service's determination.  The            
          first consequence is that no portion of the $13,180,810 CNOL                 
          sustained by Acme for its 1986 short taxable year is allowable as            
          a carryback to Acme's (i.e., the group's) 1985 taxable year.                 
          Secondly, the entire $13,180,810 CNOL is allowable as a carryback            
          to Acme's (i.e., the group's) 1984 taxable year.  The final                  
          consequence is that there are no excess investment tax credits               
          and/or credits for increasing research activity arising during               
          Acme's (i.e., the group's) 1984 taxable year that can be carried             
          back to Acme's (i.e., the group's) 1981 taxable year.                        
          Computation of Petitioner's Deficiency for 1981 and 1984                     
               Respondent treated the tentative refunds paid to Acme as                
          rebates to petitioner and the group in the computation of the                
          group's deficiencies for 1981 and 1984.                                      
               The parties stipulated that if the tentative refunds                    
          constitute "rebates" to petitioner and the group, then, without              
          taking into account certain unapplied payments made by                       
          petitioner,5 petitioner and the group are liable for deficiencies            
          for 1981 and 1984 in the amounts of $1,709,109 and $2,090,177,               

          4    Acme has agreed to extend the statutory period for                      
          assessment applicable to it and its consolidated subsidiary's 27-            
          week short taxable year ended Dec. 28, 1986.                                 
          5    Unapplied payments were made by petitioner on Aug. 31, 1992,            
          in the amounts of $616,285.76, $2,509.14, and $3,925,935.52 for              
          taxable years 1980, 1982, and 1983, respectively.                            

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