The Charles Schwab Corporation and Subsidiaries - Page 13

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               Respondent contends that section 461(d) permits a deduction            
          only for the amount of tax not accelerated by post-1960 changes             
          in State law.  Respondent quotes the following portion of section           
          461(d) with key phrases highlighted:                                        
                   “to the extent that the time for accruing                         
                    taxes is earlier than it would be but for any                     
                    action of any taxing jurisdiction taken after                     
                    December 31, 1960, then, under regulations                        
                    prescribed by the Secretary, such taxes shall                     
                    be treated as accruing at the time they would                     
                    have accrued but for such action by such                          
                    taxing jurisdiction.”                                             
               Respondent, therefore, argues that petitioner would be able            
          to deduct $932,979 for 1989.  Respondent also points out that the           
          $873,609 difference between the $932,979 allowed for 1989 and the           
          $1,806,588 that accrued for petitioner’s 1989 year under the 1972           
          law would be allowable for Federal tax purposes in petitioner’s             
          1990 year.8                                                                 
               Petitioner is willing to accept respondent’s concession that           
          it is entitled to the $932,979 deduction for its 1989 Federal tax           
          year.  Petitioner, however, contends that section 461(d) cannot             
          be partially applied.  This position has been part of                       
          petitioner’s argument from the beginning.  Petitioner’s partial             
          application argument is an attempt to focus the Court on                    
          petitioner’s original position that the 1972 law merely changed             

               8 Under the pre-1972 California franchise tax law,                     
          petitioner’s 1990 franchise tax obligation/deduction would have             
          been based on petitioner’s 1989 California income.                          

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