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Paragraph (h)(6)(iv) provides further that, if an individual may
be treated as a member of more than one family under paragraph
(h)(6)(ii), such individual will be treated as a member of the
family with the smallest increase in percentage ownership (to the
exclusion of all other families).
II. Arguments of the Parties
A. Petitioner’s Argument
Petitioner argues that, although siblings are not family
members described in section 318(a)(1), Charles and Kenneth are
nonetheless members of the same family when such determination is
made by reference to their parents and grandparents. That is, as
sons, they are both members of each family consisting of a parent
and that parent’s family members described in section 318(a)(1).
Similarly, as grandsons, they are both members of each family
consisting of a grandparent and that grandparent’s family members
described in section 318(a)(1). Accordingly, petitioner argues,
Charles and Kenneth are treated as one individual under section
382(l)(3)(A)(i), with the result that transactions between them
are disregarded for purposes of section 382.
6(...continued)
Income Tax Regs., 52 Fed. Reg. 29686 (Aug. 11, 1987). That
exception in turn does not apply if the loss corporation has
actual knowledge of such family member’s stock ownership. Id.;
sec. 1.382-2T(k)(2), Temporary Income Tax Regs., supra at 29694.
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