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activity organized as an administrative or functional unit.”
American Heritage Dictionary (4th ed. 2000); see also Black’s Law
Dictionary 188, 479 (6th ed. 1990) (defining a “branch”, in
relevant part, as a “[d]ivision, office, or other unit of
business located at a different location from main office or
headquarters”, and a “division” as an “[o]perating or
administrative unit of * * * business”). Thus, the plainly
understood import of the cited regulation’s use of the terms
“branch” and “division” to describe the impact of the deemed
section 332 liquidation resulting from a disregarded entity
election with respect to an operating subsidiary (particularly in
light of respondent’s ruling position, as set forth supra) is
that the activities of the business operation indirectly owned by
the parent through its former subsidiary become the activities of
a functional or operating business unit directly owned and
conducted by the parent.19 It follows from the language of the
regulation that the assets used in the business of the (deemed)
liquidated subsidiary retain their status as assets used in the
19 Sec. 301.7701-2(a), Proced. & Admin. Regs., does not
specify a minimum period of time after which a disregarded entity
election results in branch or division status for the disregarded
entity. Rather, the disregarded entity is deemed a branch or
division of the owner upon the effective date of the election, a
point that is conceded by respondent on brief. Nor do the check-
the-box regulations require that the taxpayer have a business
purpose for such an election or, indeed, for any election under
those regulations. Such elections are specifically authorized
“for federal tax purposes”. Sec. 301.7701-3(a), Proced. & Admin.
Regs.
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