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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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