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the cost of severing Rose employees and terminating leases, and
closing down and liquidating unneeded Rose infrastructure. On
the basis of internal judgment and experience, petitioner
determined that 5 years was a suitable period for the Rose
customers to be absorbed into petitioner and to bear the overhead
burdens in parity with petitioner’s existing accounts at the time
of acquisition.
OPINION
I. California Franchise Tax
This issue arises in connection with the parties’
disagreement concerning the application and interpretation of
section 461(d) and section 1.461-1(d)(1), Income Tax Regs.
Section 461(d) was enacted to proscribe the acceleration of State
and local tax deductions due to State or local legislation
enacted after 1960. Ultimately, this is a matter of timing and a
question of for which year(s) petitioner is entitled to deduct
California franchise tax.
Petitioner’s position is that section 461(d) was enacted to
prevent situations where taxpayers might receive two franchise
tax deductions in the same taxable year. The post-1960
California legislation in question does not, in petitioner’s
factual circumstances, cause more than one deduction in any year
under consideration. Conversely, respondent’s position is that
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