The Charles Schwab Corporation and Subsidiaries - Page 23

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          31, 1988.  Charles Schwab Corp. & Includable Subs. v.                       
          Commissioner, supra at 297; Epoch Food Serv., Inc. v.                       
          Commissioner, 72 T.C. 1051, 1053 (1979).  Accordingly, the Court            
          in Schwab I found that the 1988 California franchise tax was                
          assessed and accruable on December 31, 1988, on the basis of                
          California law before the 1972 amendments.  Because of that                 
          holding, there was no need for the Court to decide whether                  
          section 461(d) and the underlying regulations proscribed any                
          acceleration caused by the 1972 amendments.12                               
               Petitioner argues that section 461(d) was not intended to              
          result in circumstances in which a taxpayer is not entitled to              
          deduct any State tax in a particular year.  More particularly,              
          petitioner contends that the sole intent for enactment of section           
          461(d) was to prohibit acceleration of the accrual attributable             
          to post-1960 State legislation that results in double deductions.           
          On the other hand, respondent argues that section 461(d) and the            
          regulations are unambiguous and a literal reading would result in           
          no accrual or deduction of California franchise tax in                      
          petitioner’s 1989 year because it was deducted for petitioner’s             
          short year ended December 31, 1988, and no additional deduction             


               12 Because of this Court’s holding in Schwab I, petitioner             
          received two California franchise tax deductions in connection              
          with the 1988 calendar year:  One for its year ended Mar. 31,               
          1988 (computed on the basis of the 1987 California “income                  
          year”), and one for its short year ended Dec. 31, 1988 (computed            
          on the basis of the 1988 California “income year”).                         





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