Square D Company and Subsidiaries - Page 1

                                   118 T.C. No. 15                                    

                               UNITED STATES TAX COURT                                

                  SQUARE D COMPANY AND SUBSIDIARIES, Petitioner v.                    
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 6067-97.               Filed March 27, 2002.                

                    P, an accrual method taxpayer, is a U.S. corp. and                
               subs. wholly owned by S, a foreign corp.  P accrued but                
               did not pay interest owed to S and another related                     
               foreign person during 1991 and 1992 and claimed                        
               deductions of such accrued interest in those years.  R                 
               disallowed any deduction in a year prior to the year                   
               the interest was actually paid and relies on sec.                      
               1.267(a)-3, Income Tax Regs., in support of his                        
                    Held, the instant case raises the identical issue                 
               decided in Tate & Lyle, Inc. v. Commissioner, 103 T.C.                 
               656 (1994), revd. and remanded 87 F.3d 99 (3d Cir.                     
               1996), of whether sec. 1.267(a)-3, Income Tax Regs., is                
               a valid exercise of the regulatory authority granted in                
               sec. 267(a)(3), I.R.C.  In light of the reversal by the                
               Court of Appeals for the Third Circuit, we reconsider                  
               our holding.                                                           

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