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(canons of statutory construction apply to interpretation of
Treasury regulations); Whelan v. United States, 208 Ct. C1. 688,
529 F.2d 1000, 1002-1003 (1976) (canons of statutory construction
used to interpret administrative regulations).
The consolidated return regulations are built on the premise
that members of a consolidated group are a single economic entity
with regard to intercompany transactions and distributions and
that resulting gains or losses are given effect only when the
transferred property, or stock of the transacting member, leaves
the consolidated group. See also secs. 1.1502-13 & 1.1502-14,
Income Tax Regs.; see generally 3 Bittker & Lokken, Federal
Taxation of Income, Estates and Gifts, par. 90.5, at 90-48 (2d
ed. 1991):
The basic concept underlying * * * [the consolidated
return] provisions is that the consolidated group is * * * a
single taxable enterprise whose tax liability ought to be
based on its dealings with outsiders rather than on
intragroup transactions. This single taxpayer concept lies
at the heart of the treatment of intercompany transactions,
which, with some exceptions to prevent tax avoidance, are
eliminated in computing the group’s consolidated taxable
income.
Petitioner’s interpretation of section 1.1502-14(d)(4)(i)(c),
Income Tax Regs., conflicts with this framework. At the time
AVCO redeemed its note from Paul Revere, both were members of the
Textron group and both remained members as of the end of the 1987
taxable year. There were no “dealings with outsiders” that would
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