The Charles Schwab Corporation and Subsidiaries - Page 8

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          consideration, the amount of tax under the pre-1972 law was                 
          always less than the amount computed under the 1972 law.                    
               For Federal reporting purposes, on all of petitioner’s                 
          returns through the years under consideration in these cases,               
          petitioner looked to California pre-1972 franchise tax law.7                
          Under the pre-1972 California law, petitioner had claimed                   
          deductions for franchise taxes for all Federal reporting periods            
          except for the short year ending December 31, 1988.  Because                
          petitioner was obligated to accrue and pay franchise taxes under            
          the 1972 law, it was obligated for and paid franchise taxes for             
          all periods under consideration, including the short year ending            
          December 31, 1988.                                                          
               Some of the confusion in these cases arises from the fact              
          that, for Federal tax purposes, petitioner’s deduction for                  
          California franchise tax is limited to the amount computed under            
          pre-1972 California law, but petitioner’s actual franchise tax              
          obligation is based on the 1972 law.  Our prior Opinion in these            
          cases, Charles Schwab Corp. & Subs. v. Commissioner, 122 T.C. 191           
          (2004) (Schwab II), involves petitioner’s 1989 and later years,             
          whereas an earlier case, Charles Schwab Corp. & Includable Subs.            
          v. Commissioner, 107 T.C. 282 (1996) (Schwab I), involved certain           

               7 By applying pre-1972 California franchise tax provisions,            
          petitioner admitted or agreed that sec. 461(d) applied with                 
          respect to the 1972 changes to California law.                              

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