State Farm Mutual Automobile Insurance Company and Subsidiaries - Page 1

                                   119 T.C. No. 21                                    

                               UNITED STATES TAX COURT                                

             Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent               

               Docket No. 1859-01.              Filed December 19, 2002.              

                    P is an affiliated group of corporations filing a                 
               consolidated Federal income tax return.  The group                     
               comprises both life and nonlife insurance companies,                   
               referred to as the life subgroup and the nonlife                       
               subgroup, respectively.  P became subject to the                       
               alternative minimum tax (AMT) for 1987 as a result of                  
               events in 1989 generating a nonlife subgroup net                       
               operating loss carryback from 1989 to 1987.  For                       
               purposes of determining its AMT liability, P calculated                
               the book income adjustment on a consolidated basis.  R                 
               maintains that the book income adjustment is to be made                
               on a subgroup basis, with a separate adjustment for                    
               each subgroup.                                                         
                    Held:  In the context of a life-nonlife consolidated              
               return, the AMT book income adjustment is to be made using a           
               consolidated approach, with a single adjustment for the                
               entire group.                                                          

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