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tax purposes were based on a corporation’s California income for
its 1969 year. There were exceptions to that approach in
situations involving a corporation’s first year of operation and
where the reporting year was less than a full year. In certain
of those instances, the California franchise tax was based on the
California income for the reporting year (due or accruable as of
the close of the reporting year).
Our holding that section 461(d) applies results in a
limitation on petitioner’s deduction for California franchise tax
to the amount accruable under California law as in effect before
1972. Significantly, during the years under consideration,
petitioner was obligated for California franchise taxes under the
regimen of the 1972 law. Under the 1972 law, petitioner was
obligated for California franchise taxes in amounts equal to or
larger than those computed under the pre-1972 law. In addition,
petitioner paid a franchise tax liability for each taxable period
beginning with the 1987 year, when it commenced business in
California.
The following table reflects the amounts of petitioner’s
California franchise tax obligations (including respondent’s
concession for the 1989 year) computed under the pre-1972 law and
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Last modified: May 25, 2011