- 12 - entitle the group to take into account the loss from that intercompany transaction. For purposes of section 1.1502-14(d)(4)(i), Income Tax Regs., we determine the status of Paul Revere as a member or “nonmember” of the Textron consolidated group at the time of redemption of the note. We interpret the word “nonmember” in that provision of the regulations as applying to cases where a member of a consolidated group cancels or redeems an obligation that is held, or was held, by a corporation that is a nonmember at the time of cancellation or redemption. We do not read section 1.1502-14(d)(4)(i), Income Tax Regs., as applying to cases such as we have here where a corporation/noteholder was acquired by and became a member of the consolidated group before the note’s redemption or cancellation. Our reading is supported by consideration of the result that would have occurred had AVCO redeemed Paul Revere’s AVCO stock in 1977 for cash. In that case, Paul Revere’s loss on the redemption would have been deferred under section 1.1502- 14(b)(2)(iii), Income Tax Regs., and would have continued to be deferred as of the end of the 1987 taxable year even though AVCO and Paul Revere were then members of the Textron group rather than the AVCO group. See secs. 1.1502-13(f), 1.1502-14(b)(3), (f), Income Tax Regs. (termination of a consolidated group due to the acquisition of its common parent by a nonmember does notPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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