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III. Summary of the Parties’ Arguments
A. Petitioner’s Argument
Petitioner argues that, by permitting a corporate taxpayer
to “disregard” the separate entity status of a subsidiary and,
instead, treat the subsidiary’s business as a hypothetical branch
or division of the parent, the check-the-box regulations override
the principle, based upon Moline Props., Inc. v. Commissioner,
319 U.S. 436, 438-439 (1943), that the separate entity status of
a corporation may not be ignored for Federal tax purposes. As a
result (as petitioner sees it), Dover UK is deemed not only to
sell H&C’s assets (rather than its shares in H&C) but is deemed
to be engaged in H&C’s business at the time of that sale.
Therefore, petitioner argues that the H&C assets are excluded, by
section 1.954-2(e)(3)(ii) through (iv), Income Tax Regs., from
the definition of property “which does not give rise to any
income”, with the result that the deemed sale of those assets did
not give rise to FPHCI pursuant to section 954(c)(1)(B)(iii).8
Alternatively, petitioner argues that, giving effect to the
“plain and ordinary meaning” of section 954(c)(1)(B)(iii), Dover
UK’s deemed sale of the operating assets of H&C “could not
8 We find the parties to be in agreement that, whatever our
decision regarding the issue of whether Dover UK’s deemed sale of
the H&C operating assets constituted a sale of “property which
does not give rise to any income”, that decision applies to all
of H&C’s assets as of the date of the deemed asset sale to
Thyssen.
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