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tentative refunds on behalf of the Interlake group. In deciding
whether the refunds were rebate or nonrebate, the Court examined
section 1.1502-78(b)(1), Income Tax Regs., which provides:
Any refund allowable under an application referred to
in paragraph (a) of this section shall be made directly
to and in the name of the corporation filing the
application, except that in all cases where a loss is
deducted from the consolidated taxable income or a
credit is allowed in computing the consolidated tax
liability for a consolidated return year, any refund
shall be made directly to and in the name of the common
parent corporation. The payment of any such refund
shall discharge any liability of the Government with
respect to such refund.
The Court determined that, for purposes of section 1.1502-
78(b)(1), Income Tax Regs., “the common parent” is the
corporation that has authority to act as an agent for the
affiliated group.
The Court held that petitioner did not have authority to act
for the group and receive the tentative refunds because, as the
parties–-Interlake and respondent–-had agreed in their
stipulation of settled issues, petitioner was no longer
affiliated with the group; therefore petitioner’s authority to
act for the group ceased when its affiliation was terminated.
The tentative refunds made to petitioner were “nonrebate refunds
with respect to * * * [Interlake] and the group for purposes of
computing the group’s deficiencies for 1981 and 1984.” Interlake
Corp. v. Commissioner, supra at 115. Therefore, the Court held
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