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sections 265(b)(2) and 291(e)(1)(B) as if it were acquired on
August 7, 1986; thus, qualified tax-exempt obligations reduce
interest expense deductions under section 291(a)(3) and
(e)(1)(B), rather than under section 265(b). The parties agree
that the tax-exempt obligations owned by Investments are
“qualified tax-exempt obligations”.
In calculating the amount of the denominator for Peoples,
the parties agree that the denominator includes Peoples’ adjusted
basis in its Investments stock. The parties lock horns on
whether the tax-exempt obligations purchased and owned by
Investments must be included in the numerator. On the
consolidated returns, Peoples omitted those obligations from the
numerator. Respondent determined that those obligations are
included in the numerator. As respondent sees it, because the
basis of Peoples’ Investments stock is included in the
denominator, the portion of that basis attributable to the bases
of Investments’ tax-exempt obligations is included in the
numerator.
We begin our analysis with the relevant text. We interpret
the text with reference to the legislative history primarily to
learn the purpose of the statutes and to resolve any ambiguity in
the text. See United States v. Am. Trucking Associations, Inc.,
310 U.S. 534, 543-544 (1940). We apply the text as written
unless we find that a word’s meaning is “‘inescapably ambiguous’”
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