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she is entitled to the benefit of section 59(g), even in the
absence of the regulation permitted thereunder. Section 59(g)
provides:
SEC. 59(g). Tax Benefit Rule.--The Secretary may
prescribe regulations under which differently treated
items shall be properly adjusted where the tax
treatment giving rise to such items will not result in
the reduction of the taxpayer’s regular tax for the
taxable year for which the item is taken into account
or for any other taxable year.
On brief, petitioner maintains that
The “differently treated” item in the AMT system
(that is, the ISO Spread that cannot be offset against
capital loss, as otherwise permitted by section
422(c)(2) or as occurs naturally on a sale that is not
a disqualifying disposition on a decline in value of
the ISO stock) is precisely the type of situation that
ought to be remedied under section 59(g). Otherwise,
the imposition of AMT in this situation can produce
results that are inequitable and unfair, by imposing a
tax on “phantom income” that is not true economic
income, and accordingly that will never be subject to
tax in the regular tax system.
In the absence of the regulations that respondent is
authorized, but not mandated, to promulgate under section 59(g),
petitioner urges us, in effect, to do so. Petitioner cites
Hillman v. IRS, 250 F.3d 228, 233 (4th Cir. 2001), revg. 114 T.C.
103 (2000), to support the proposition that in petitioner’s type
of situation an exception can be made to the literal application
of the statutory provision (here, the AMT) because the literal
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Last modified: May 25, 2011