Northern Telecom Inc. & Subsidiaries - Page 12




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          finally came into existence and property interests changed hands            
          by virtue of the purchase agreements and the assignment and                 
          delegation agreements, the transfer occurred between petitioner,            
          as seller, and the subsidiary, as buyer.                                    
               The next argument of respondent is that, even if the                   
          subsidiary received contractual rights to purchase nonexisting              
          property in the future from the third-party customers followed by           
          receipt of property interests in the telephone systems from                 
          petitioner, the transaction was not an intercompany transaction.            
          Essentially, respondent contends that the transactions were                 
          three-party transactions in which the subsidiary received its               
          rights through the third-party customers, and, thus, not all                
          parties of the transaction were members of one consolidated                 
          group.                                                                      
               Section 1.1502-13(a)(1)(i), Income Tax Regs., states that              
          “an intercompany transaction would include a sale of property by            
          one member of a group * * * to another member of the same group.”           
          (Emphasis added.)  Thus, in determining whether a sale occurred             
          between members of the same consolidated group, we look at the              
          participants to the sale of the property.  As already set forth             
          above, under the State law governing these transactions, a                  
          transfer of a contractual right to purchase nonexisting property            
          in the future is not a part of the sale of the underlying                   
          contractual property.  The parties to the sale, which occurred              





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