Textron Inc. and Subsidiary Companies - Page 9

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               It is well settled that the heading of a section does not              
          limit the plain meaning of the text.  See Brotherhood of R.R.               
          Trainmen v. Baltimore & O.R. Co., 331 U.S. 519, 529 (1947);                 
          Warren v. Commissioner, 114 T.C. 343, 347 (2000).  The text of              
          section 1.1502-14(d)(4), Income Tax Regs., requires only that an            
          obligation be received in exchange for property and that the                
          basis of the obligation be determined by reference to the basis             
          of the property exchanged.  Paul Revere received the AVCO note in           
          exchange for its AVCO stock, and its basis in the note was                  
          determined by reference to its basis in the stock.  See sec.                
          1.1502-31(b)(2)(ii), Income Tax Regs.  Thus, we find the stock              
          redemption to be a qualifying exchange covered by the provision.8           
          3.   Whether Paul Revere Was a “Nonmember”                                  
               Section 1.1502-14(d)(4), Income Tax Regs., applies only if             
          the obligation at issue “has never been held by a nonmember”.               
          Sec. 1.1502-14(d)(4)(i)(c), Income Tax Regs.  Section 1.1502-               
          14(d)(4)(i)(c), Income Tax Regs., does not specify how or when a            
          corporation’s status as a member or nonmember is to be                      
          determined.  Petitioner focuses on the word “nonmember” and                 
          concludes that the deferral of Paul Revere’s loss ended in 1987,            

               8 Even if the heading did limit the scope of the provision,            
          the AVCO group recognized no gain or loss on the stock redemption           
          because the redemption was governed by sec. 1.1502-14(b)(1),                
          Income Tax Regs.  The fact that the redemption would have been              
          taxable under sec. 302 had AVCO and Paul Revere not been members            
          of the same consolidated group is immaterial.                               

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