Intermet Corporation & Subsidiaries - Page 11




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               to comply with all pertinent state and federal laws and                
               thereby gave rise to the liabilities incurred in                       
               complying with these laws.  According to this logic,                   
               every corporation would have a specified liability                     
               carryback for all costs the corporation incurred to                    
               comply with relevant laws.  Congress did not create                    
               such a windfall. [Sealy Corp. v. Commissioner, 171 F.3d                
               at 657-658.]                                                           
               In Host Marriott Corp. v. United States, 113 F. Supp. 2d 790           
          (D. Md. 2000), affd. without published opinion ___ F.3d ___ (4th            
          Cir. 2001), the question whether interest payments on Federal               
          income tax deficiencies constitute specified liability losses               
          within the meaning of section 172(f)(1) was resolved in favor of            
          the taxpayer, who reported a CNOL for 1991.  In part, the CNOL              
          consisted of approximately $46 million representing interest paid           
          on tax deficiencies for the taxable years 1977, 1978, and 1979,             
          and approximately $7 million in payments made on workers’                   
          compensation claims for injuries sustained before 1988.  The                
          taxpayer argued that both categories of payments constituted                
          specified liability losses that qualified for carryback to the              
          taxable years 1984 and 1985.                                                
               In holding for the taxpayer, the District Court cited the              
          plain language of section 172(f)(1)(B), stating:                            
               The statutory language clearly poses two restrictions                  
               upon application of the deduction in this case.  First,                
               the claimed deduction must be a liability that arises                  
               out of Federal or state law.  Both of Plaintiff’s                      
               losses meet this requirement.  The liability for                       
               federal income tax deficiency interest arises out of 26                
               U.S.C. �6601(a) under a rate established by �6621.  The                
               liability for workers’ compensation payments arises out                
               of various state laws.  Second, the claims must arise                  





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