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Debra Sadow Koenig, for petitioner.
Lawrence C. Letkewicz, Christa A. Gruber, and Sharon S.
Galm, for respondent.
OPINION
LARO, Judge: This case was submitted to the Court under
Rule 122 for decision without trial.1 Petitioner petitioned the
Court to redetermine respondent’s determination of deficiencies
of $33,622, $38,571, $41,654, and $31,868 in the 1999, 2000,
2001, and 2002 Federal income taxes, respectively, of its
affiliated group. For those years, the group filed consolidated
Federal corporate income tax returns. The group included
petitioner, petitioner’s wholly owned subsidiary Peoples State
Bank (Peoples), and Peoples’ wholly owned investment subsidiary
PSB Investments, Inc. (Investments).
We decide whether Peoples must include the tax-exempt
obligations purchased and owned by Investments in the calculation
of Peoples’ average adjusted bases of tax-exempt obligations
under sections 265(b)(2)(A) and 291(e)(1)(B)(ii)(I). We hold
that the calculation does not include those obligations.
1 Rule references are to the Tax Court Rules of Practice and
Procedure. Unless otherwise noted, section references are to the
applicable versions of the Internal Revenue Code.
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Last modified: March 27, 2008