Coggin Automotive Corporation - Page 27

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          to prevent the attribution of the dealership’s LIFO reserves to             
          petitioner.  Section 1363(d)(4)(D) provides:                                
                    (D) Not treated as member of affiliated group.–-                  
               Except as provided in regulations, the corporation                     
               referred to in * * * [section 1363(d)(1)] shall not be                 
               treated as a member of an affiliated group with respect                
               to the amount included in gross income * * *                           
          Simply stated, section 1363(d)(4)(D) requires that a member of an           
          affiliated group that elects to be an S corporation be treated as           
          an independent entity for purposes of determining the amount                
          included in gross income.  Section 1363(d)(4)(D) requires only a            
          converting member of the affiliated group (rather than each member          
          of the affiliated group) to be responsible for the tax imposed on           
          the recapture of the corporation’s LIFO reserves.  See S. Rept.             
          100-445, at 438 (1988).  Section 1363(d)(4)(D) does not prohibit            
          attribution of the inventory and LIFO reserves to petitioner in             
          this case.                                                                  
               To conclude, we hold that the aggregate approach (as opposed           
          to the entity approach) better serves the underlying purpose and            
          scope of section 1363(d) in the circumstances of this case.                 
          Consequently, petitioner is deemed to own a pro rata share                  
          ($4,792,372) of the dealerships’ inventories.  Accordingly, we hold         
          that upon its election of S corporation status, petitioner was              
          required to include in its gross income its ratable share of the            
          LIFO recapture amount.                                                      
               In reaching our conclusions, we have considered carefully all          
          arguments made by the parties for a result contrary to that                 

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