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Corporations D and E are a consolidated group for tax
purposes. D and E do not have a consolidated financial
statement. On their separate financial statements D
and E have adjusted net book income of $100 and $50
respectively, and preadjustment alternative minimum
taxable income of $50 and $80 respectively. Assuming
there are no intercompany transactions, DE’s
consolidated adjusted net book income * * * is $150 and
its consolidated pre-adjustment alternative minimum
taxable income * * * is $130. DE must increase its
consolidated pre-adjustment alternative minimum taxable
income by $10 (($150 - $130) x .50).
II. Overview and Positions of the Parties
This controversy involves the intersection between the life-
nonlife consolidated return rules and the AMT book income
adjustment provisions. While each of the foregoing topics is the
subject of a detailed and complex statutory and regulatory
scheme, neither regime directly addresses how the two should be
combined. By focusing on different aspects of the texts enacted
or promulgated and their historical development, the parties here
arrive at conflicting conclusions. To summarize the primary
difference in their respective positions, petitioner maintains
that the book income adjustment is to be computed on a
“consolidated” basis, with a single adjustment for the entire
group; respondent advocates a “subgroup” approach, with a
separate book income adjustment for the life subgroup and for the
nonlife subgroup.
Petitioner approaches the problem at hand by focusing
principally on the specific language of the statute and
regulations addressing the book income adjustment. Therein
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