Textron Inc. and Subsidiary Companies - Page 1

                                   115 T.C. No. 6                                     

                               UNITED STATES TAX COURT                                

                TEXTRON INC. AND SUBSIDIARY COMPANIES, Petitioner v.                  
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 20643-98.                   Filed August 7, 2000.           

                    A filed a consolidated return with its wholly-                    
               owned subsidiary (PR) in 1977.  During that year, A                    
               distributed a note to PR in redemption of PR’s shares                  
               in A.  In 1985, P acquired more than 80 percent of the                 
               stock of A, and thereupon A and PR became members of                   
               P’s consolidated group.  In 1987, A redeemed the note                  
               from PR.  Later that year, PR liquidated into A.  Held:                
               Under sec. 1.1502-14(d)(4), Income Tax Regs., P may not                
               take a deduction in 1987 for the capital loss PR                       
               realized on the redemption of A’s note.                                

               James P. Fuller, Kenneth B. Clark, and David L. Forst, for             
               Nancy B. Herbert and Ruth M. Spadaro, for respondent.                  

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