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Interlake v. Commissioner
On March 18, 1999, the Court decided Interlake Corp. v.
Commissioner, 112 T.C. 103 (1999), on cross-motions for summary
judgment. In the stipulation of facts and stipulation of settled
issues in that case, the parties thereto, namely, Interlake and
respondent, agreed that Interlake was the common parent of the
affiliated group after the restructuring. Respondent also
conceded that a refund paid to the “wrong taxpayer, or to an
unauthorized recipient of the taxpayer”, is a nonrebate refund
that may not be taken into account in computing a deficiency.
Respondent having made the foregoing concessions, the only issue
for decision was whether the tentative refunds paid to petitioner
were rebates or nonrebates to Interlake for purposes of computing
the affiliated group’s deficiencies, if any, for 1981 and 1984
under section 6211. Section 1.1502-6(a), Income Tax Regs.,
provides that each member of an affiliated group is severally
liable for any taxes computed on the basis of a consolidated
return. The significance of the rebate/nonrebate distinction is
that if the refunds were held to be nonrebate refunds as to
Interlake, they could not be taken into account in computing the
affiliated group’s deficiencies and could not be recovered from
Interlake through the deficiency procedures.
The rebate/nonrebate character of the tentative refunds
turned on whether petitioner was “authorized” to receive the
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