William L. Richter - Page 13

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          the enactment of OBRA), provides that the qualified investment              
          must be apportioned among the trust and its beneficiaries on the            
          basis of the trust’s income allocable to each.  See also sec.               
          1.48-6, Income Tax Regs.  In enacting section 48, Congress                  
          recognized that when income is taxed in part to an organization             
          and in part to its shareholders or beneficiaries, the investment            
          credit is apportioned among the parties in accordance with their            
          sharing of income for tax purposes.  S. Rept. 1881, 87th Cong.,             
          2d Sess. (1962), 1962-3 C.B. 707, 726; H. Rept. 1447, 87th Cong.,           
          2d Sess. (1962), 1962-3 C.B. 405, 419.                                      
               Respondent disallowed petitioner’s energy credit because he            
          determined none of HEH’s income was allocable to petitioner                 
          during 1995 and, alternatively, because the purported purchase of           
          energy was, in substance, a sale of solar equipment to                      
          petitioner.  Because we hold that petitioner has failed to prove            
          that any of HEH’s income or HEH’s investment in energy property             
          was allocable to him during 1995, we need not address                       
          respondent’s second argument.                                               

                         (2) any beneficiary to whom any investment                   
                    has been apportioned under paragraph (1) shall be                 
                    treated (for purposes of * * * [secs. 46, 48, and                 
                    50]) as the taxpayer with respect to such                         
                    investment, and such investment shall not (by                     
                    reason of such apportionment) lose its character                  
                    as an investment in new section 38 property or                    
                    used section 38 property, as the case may be.                     
                    [Emphasis added.]                                                 

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