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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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