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restore deferred gains and losses if the members of the
terminating group become members of another group). The subject
loss, therefore, would have continued to be deferred in the year
in which petitioner now claims it is deductible.
Petitioner seeks a result different from a cash redemption
relying on the mere fact that AVCO redeemed the stock for a note
rather than cash. We do not believe that this distinction in
fact leads to a different result. Petitioner offers no
explanation why the consolidated return regulations would give
effect to gains and losses realized in intercompany redemptions
paid for with debt but not those realized in intercompany
redemptions paid for by cash or other property. In fact, we
understand petitioner to concede that Paul Revere’s status as a
member of the Textron group at the time the loss was realized on
the note redemption satisfies the membership requirement of
section 1.1502-14(d)(4)(i)(a), Income Tax Regs. (“A member
received an obligation of another member in exchange for
property”), even though Paul Revere was not a member of the
Textron group at the time it received the AVCO note in exchange
for the AVCO stock. We conclude that Paul Revere is a member for
purposes of section 1.1502-14(d)(4)(i)(c), Income Tax Regs., and
that the AVCO note was never held by a nonmember.
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