New York Football Giants, Inc. - Page 10

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          corporation during the taxable year.  Sec. 1366(f)(2).5  Thus,              
          the loss arising from the section 1374 tax is a subchapter S item           
          under section 301.6245-1T(a)(1)(i), Temporary Proced. & Admin.              
          Regs., supra.                                                               
               Petitioner’s contention that the regulation is illogical               
          fails to meet the Chevron standard under which we invalidate a              
          regulation if it is arbitrary, capricious, or contrary to the               
          statute.  See also United States v. Mead Corp., 533 U.S. ___,               
          ___, 121 S. Ct. 2164, 2171 (2001) (“administrative implementation           
          of a particular statutory provision qualifies for Chevron                   
          deference when it appears that Congress delegated authority to              
          the agency generally to make rules carrying the force of law, and           
          that the agency interpretation claiming deference was promulgated           
          in the exercise of that authority”).  We reject petitioner’s                
          contention that section 301.6245-1T(a)(1)(vi)(G), Temporary                 
          Proced. & Admin. Regs., supra, is arbitrary, capricious, or                 
          manifestly contrary to section 6245.                                        
          F.   Conclusion                                                             
               Under section 6245, as already noted, the unified audit and            

               5  Sec. 1366(f)(2) provides as follows:                                
                    (2) Treatment of tax imposed on built-in gains.–                  
               If any tax is imposed under section 1374 for any                       
               taxable year on an S corporation, for purposes of                      
               subsection (a), the amount so imposed shall be treated                 
               as a loss sustained by the S corporation during such                   
               taxable year.  The character of such loss shall be                     
               determined by allocating the loss proportionately among                
               the recognized built-in gains giving rise to such tax.                 

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