The Charles Schwab Corporation and Subsidiaries - Page 4

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          position was in error and that petitioner is entitled to the                
          deduction it had claimed for 1989.4                                         
               Petitioner seems willing to accept respondent’s concession             
          but continues to assert that it is entitled to more than the                
          $932,979 claimed on its 1989 Federal return.  To sort out the               
          motion for reconsideration, we must consider the somewhat                   
          complicated underlying factual background for respondent’s                  
          position and his change in position.                                        
               California franchise tax, before the 1972 law, was generally           
          measured by the prior year’s income and accrued on January 1 of             
          the reporting year.  For example, a 1970 California franchise tax           
          obligation and the resulting amount deductible for 1970 Federal             

               4 Respondent contends that he made a concession and changed            
          his position in the final posttrial brief (reply brief).  In his            
          reply brief, however, respondent, after stating that his overall            
          position on the franchise tax issue was correct, merely stated:             
          “The position in the notice of deficiency, allowing a $932,979              
          deduction for 1989, is correct.”  There was no explanation as to            
          the theory underlying respondent’s change of mind, and there was            
          no explanation as to how respondent’s “concession” may have                 
          changed or affected respondent’s overall position on the primary            
          issue.  Respondent’s alleged concession was without a legal basis           
          for allowing petitioner the deduction and did not clearly or                
          concisely concede the $932,979 amount.  Respondent simply stated            
          that the position in the notice was correct.  The notice,                   
          however, contains no rationale for allowing or disallowing any              
          part of the franchise tax deduction claimed for 1989.  From the             
          Court’s point of view this “concession” was not obvious or                  
          appropriate.  It was inappropriate because petitioner had based             
          its trial and briefing position on respondent’s arguments at                
          trial and in his original brief, and petitioner did not have a              
          chance to respond to respondent’s ineffective attempt to concede            
          in his reply brief.                                                         

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