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general, section 535(b)(5) permits a reduction for net capital
losses for the taxable year. Section 535(b)(6) provides for a
reduction for net capital gains, less tax attributable to said
gains. Finally, section 535(b)(7) makes inapplicable the
ordering rules for capital losses under section 1212 and provides
for the carryover of the prior year’s net capital loss.
The net effect of the provisions regarding capital gains and
losses is to remove them from the accumulated earnings tax base,
irrespective of whether they resulted in gain or loss.
Respondent has removed the net capital gains in accord with the
statute. The limitation argued for by petitioner does not
comport with the statute, because the amount of tax liability
reported by petitioner is not, ultimately, the “tax imposed” by
the statute.
A similarly worded adjustment and computation for removing
net capital gains from the computation of the personal holding
company tax is provided for in section 545(b)(5). Like the
accumulated earnings tax, the personal holding tax is considered
a “penalty” tax. Taxpayers, in the context of the personal
holding tax, have made arguments similar to those made by
petitioner in this case. They argued that the tax imposed should
equal the tax accrued for purposes of the capital gain
adjustment. This Court rejected those arguments, holding that
Congress was aware that taxpayers would not be able to deduct
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