Textron Inc. and Subsidiary Companies - Page 10

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          upon AVCO’s redemption of the note, because Paul Revere held the            
          note for 7 years before Paul Revere became in 1985 a member of              
          the Textron group.9  Throughout that 7-year period, Paul Revere             
          and AVCO both had been members of the AVCO group.                           
               We disagree with petitioner’s interpretation of the word               
          “nonmember” in section 1.1502-14(d)(4)(i), Income Tax Regs.,                
          because it reads that word out of context and in isolation.  The            
          salient fact is that Paul Revere, having held the note from the             
          date of its issuance, was a member of the Textron group when the            
          note was redeemed.  Petitioner’s reading is incongruous with the            
          purpose of the consolidated return regulations and leads to an              
          unreasonable result.  The provisions of the regulation in                   
          question must be construed consistently with the framework of the           
          consolidated return regulations, in light of their overall                  
          purpose and regulatory scheme.  Cf. Albertson’s, Inc. v.                    
          Commissioner, 42 F.3d 537, 541 (9th Cir. 1994), affg. 95 T.C. 415           
          (1990); Woodral v. Commissioner, 112 T.C. 19, 22 (1999); see also           
          Estate of Schwartz v. Commissioner, 83 T.C. 943, 953 (1984)                 

               9 Sec. 1.1502-1(a) and (b), Income Tax Regs., defines                  
          “group” and “member” as follows:                                            
                         (a) Group.  The term “group” means an                        
               affiliated group of corporations as defined in section                 
               1504.  See section 1.1502-75(d) as to when a group                     
               remains in existence.                                                  
                         (b) Member.  The term “member” means a                       
               corporation (including the common parent) which is                     
               included within such group.                                            

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