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sec. 1502. Though Paul Revere may have realized a genuine
economic loss on a separate entity basis, recognition of that
loss is deferred by reason of petitioner’s election to be bound
by the consolidated return regulations.
5. Whether the Loss Was Restored Upon Liquidation of Paul
Revere
As a final matter, we note that the liquidation of Paul
Revere in 1987 did not restore Paul Revere’s loss on the note
redemption. A member’s gain or loss deferred by section 1.1502-
14(d)(4), Income Tax Regs., is restored immediately before the
earlier of the time: (1) When the deferring member (in this
case, Paul Revere) ceases to be a member, or (2) when the stock
of the debtor member (in this case, AVCO) is considered to be
disposed of by any member. See sec. 1.1502-14(d)(4)(ii), Income.
Tax Regs. However, in the event the deferring member ceases to
be a member because its assets are acquired by another member of
the group in a transaction described in section 381(a) (such as a
section 332 liquidation), the gain or loss is not so restored.
See sec. 1.1502-14(e)(2), Income Tax Regs. Paul Revere ceased to
be a member of the Textron Group when it liquidated in a section
332 transaction. Thus, the liquidation was not a restoration
event.
In reaching our holdings herein, we have considered all
arguments made by the parties, and, to the extent not discussed
above, we find those arguments to be irrelevant or without merit.
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