Coggin Automotive Corporation - Page 25

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          transfers of inventory between related entities.8  This result              
          clearly would be inconsistent with the legislative history of               
          sections 1363(d) and 1374 and the supersession of the General               
          Utilities doctrine.                                                         
               Courts have, in some instances, used the aggregate approach            
          for purposes of applying nonsubchapter K provisions.  For instance,         
          in Casel v. Commissioner, 79 T.C. at 433, we upheld the                     
          Commissioner’s use of the aggregate approach for purposes of                
          applying section 267 (disallowance of losses between related                
          parties).  In Holiday Village Shopping Ctr. v. United States, 773           
          F.2d at 279, the Court of Appeals for the Federal Circuit applied           
          the aggregate approach for purposes of determining the extent of            
          depreciation recapture to each shareholder.  Similarly, the Court           
          of Appeals in Unger v. Commissioner, 936 F.2d 1316 (D.C. Cir.               
          1991), affg. T.C. Memo. 1990-15, used the aggregate approach in             
          determining a taxpayer’s permanent establishment.  In each of these         
          instances, the court analyzed the relevant legislative history and          
          statutory scheme in determining whether the aggregate or entity             
          approach was more appropriate.  Moreover, we are mindful that the           
          aggregate approach is generally applied to various subchapter K             
          provisions dealing with inventory and other built-in gain assets            

               8    Under sec. 704(c) the contributing partner is normally            
          allocated the “built-in” gain of the asset.  However, if there is           
          no liquidation of LIFO layers, no gain or loss would be allocated           
          to a contributing partner who uses the LIFO method.  This would             
          render sec. 704(c) effectively useless in allocating the built-in           
          gain deferred by the LIFO method of accounting.                             

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Last modified: May 25, 2011