yes it is wrong and your argument that it doesn't apply here is because there was something that you know a fact overruled it by virtue of either a statute or regulation is that correct that apply to duplicated losses or consolidated taxpayers and then the temporary reg came out what about nine months later there was a temporary reg that's right and then that was followed by another regulation after between the right decision and the temporary reg about to yes but that didn't mean there wasn't regulatory guidance in there your honor and our briefing makes it clear that the regulations in place then directed to cain white into respects and to specific respects as it related to the deductions in this case and it's those regulations that create the distinction between this case and it will fail so we didn't do that your honor the only thing we admitted for purposes of summary judgment was that the to the similarity of the values but we disagreed into specific requests with the application  fic lumber it's the second half of the equation that's different from this case your honor in pacific number the case was tried and there was no difference of opinion on the values and no change in the  asset values or the investment that produced the conclusion that it was the same economic loss now on the front half of this we have regulatory compliance also with specific directives in the regulations th that on don't both levels your honor that they're not the same economic laws as a matter of proven fact on this record and given the opportunity and remit and we can demonstrate why that's the case but more said if you want another deduction in your shell there's a matter of fact the deductions for the same economic loss on you're going to have to have a specific provision that provides support right it's a clear statement rule does the regulation to is judge bro averted the temporary regulation does that provide a clear statement or not i think the regulations do provide a clear statement and therefore get lots is relevant and that's why we're compliant with the regulations were compliant with the statutory scheme we need the exact calculation the i r s regulations required us to make and i might add your honor but the losses were not disallowed on that on top of that to clear this to be a dud the duction which historically it wouldn't be because it's regulatory compliant with specific regulatory directives ok let's stop there how's that regulatory compliance in two sorry when did you do the first transaction with lehman and in two thousand and one that was regular tory compliant with no wet when went in in january two thousand and one i think that was completed in two thousand and one i don't know the specific date but i was year two thousand once so you did that and that was under a reg that says you couldn't deduct a stock loss that was a good look at her but asset losses not right and it was determined that that was under composition of assets that was completely different than when the two thousand and two and two thousand and three asset lost adoptions were taken which is the fundamental factual difference in this case f and the government sort of issued before says whether you can deduct the fact you know two or three asset losses that's correct and what you did zero two zero three you could have a temporary reg i thought you argue was going to be that where it says that in the right so rate one point five zero to haifa eighty eighty which is part of the temporary regulation sense you can take your deductions under one sixty is set down in our brief at six hyphenate in the opening pretty thin fifteen and sixteen and then in the reply of twelve that regulation actually is relevant to the basis calculation itself in the assets your honor and that is the controlling regulation on that point so looking specifically post right eight it contain last limitations rules that control governing the deductions two then they also provided for specific calculations for the basis in the subsidiary stock and that is sixty seven fed rate six five six zero hyphen or one set forth in one point one five zero two hyphen three what do these do that tell you that you can take the asset loss after having previously taken a stock loss what they told us was how to deduct the asset losses under the formula provided by the i r s which we followed they didn't tell us anything about the stop loss because the i r s wasn't telling us anything about the stock loss and the only reason that these deductions were condemned was based on a formula that understand that your honor in it and i want to say very clearly that the formula that the i r s applied to declare that this was a double deduction does not prove as a matter of fact that  but the government agreed it had the burden of persuasion on this double deduction issue and there are no special rules on summary judgment that you know that is that factor but on fact your honor they agreed they had the burden of persuasion they stock loss on one group of assets in two thousand one in asset losses in two thousand and two and two thousand and three with a different underlying basis of assets you have to meet a specific comparison between the values and basis in two thousand one of the assets and the values and basis of two thousand and two and two thousand and three the assets and to do that you have to look at the actual data underlying the transactions we're asking you we've got to go so whether it needs to be amended regardless of who has the burden how what were the losses that were taken in a war and what were the losses taken no two or three and why as a matter of fact if you went back you could prove that they were not duplicate it as a matter of fact yes so let me address that in two thousand and one the stock loss was taken based on the value of the pool of assets that existed then and a basis calculation made in two thousand and one on that pool of assets that's required by the regulations fast forward to two thousand and two two thousand and three one hundred entities had been required that are going concerns that are now added to that asset pool the value of those entities fluctuates and it changes it's not the same  so when the calculation is made in two thousand two hundred two thousand three under the regulations you have different asset bases and values that support the deduction now until you go back to  is cap you're correct is that fair i'm not i don't think it's again it is the regulations permitted us to do what we did when we did the new we enacted regulations might disallow these to duction disconnect there between the intent the intent would seem to disallow the tax treatment that took a right tokyo but there's are arguable point that well that may have been the intent but that's not what the language of the regulations well in i would put both of those together it wasn't in the language of the regulations the i r s was allowing these kinds of transactions in other instances to go through under the regs they specifically didn't provide any different calculations in the regulations  no no but but but i also don't think that's what i think is the is the proper legal issue under god assessments reasonable doubt it always lies the penalty tax is right well that's not true you're under the penalty tax analysis and goddess mint related only to the s is construction of the statutory scheme the reasonable miss and alice this was based on the taxpayers own the valuation of the regulations and that was held to be reasonable because the taxpayer followed what was in on reasonable incorrect interpretation of the law and claim deductions with respect to penalties garver since recent illness principle is broader than that and the tax court case is it it's a reasonable this principle that applies beyond the confines of penalty tax and back to this intended shoe that i r s is intent was clear here these regulations were in place they did apply these regulations t temporary regulation and everything that operated on the duplicated laws a principle that existed between writing on the one hand and the changes of years later when you get back on the boat and tell us where in the temporary regulation and specifically looking at one point three three seven the dash to t was limitations when the period prior you can tell us how this asset this asset sells or three or two or three comply with that regulation that amalgam the stock loss in march of two thousand and two the i r s announced here's here's what the replacement rate is going to do and i think those were issued maybe in proposed form in october of two thousand and two and i think they were finalised another three with a march two thousand and two effective date because that's when the i r s announced publicly here's what they're going to do and what those new regulations do is they disallow the stock loss cert and write a expired which is right at the end of two thousand and one between that and march seventh of zero two there is a gap and and that's what they took advantage  why shouldn't they i mean if we follow the rules and know that is your argument that it's not enough that the gap didn't prevent them from doing with but rather the way you ration needed to express authorize them to do this is that your argument our argument is that when when the right a court invalidated the nine hundred ninety regulation all together rather than on an as stock outside the group hundred percent of stock outside the group you mean you are not thinking now that subsidiary or a sale of the subsidiaries stock to somebody outside the group one hundred percent not four percent ok so the the the two losses you know one would have been taken by the consolidated group on the sale of the stock the second ross would have been taken by this outside person that bought the stock and then sold the assets and what the right course said is you know you've got you know heaven and tried group trust good is that you mean here i mean i  name here is that right even validated the regulation it was a regulation the nine hundred ninety reg that would have patently precluded the tax treatment to came right took in this case correct right but that regulation was thrown out by the if you came away from doing what it did right if the right a court had said this regulation is invalid as applied in this case right in front of us which is which i think everybody agrees it was when you've got a facts we're going to you know we're going to rework the regs to comply with write it in the you know in the interim the reg would still be on the process but the writing court though just wiped it all away and that's why we have this this  because it was so then let's forget about it's gone bats where we'll sell comes out all right well then why is this and it all fell case when he's acknowledged correctly i think as you know duquesne is no longer arguing that section one sixty five which is just a general last adduction provision provides the quote clear declaration of aggression one tent that you need to overcome here that's not enough that's a general rush right that's right you're focusing on the right right right and there is this there is this gap and again it's there it's a judicially created gap overlays made to address this specific kind of situation is really nothing so you need you need you need us to say with a wink and a nod we all know what's going on here this is unfair and even though the reag the gap didn't catch the first step the stock sale and that's where pacific lumber will filter whatever you want to sell you always there to catch the stock sale net occurred be treated that as percent piece of the stock and sold it so that they didn't break consolidation so they took this huge loss on the stock but they still own the company so they they're going to get that you know as soon as the company sells its assets they're getting the exact same loss i mean and this is what will fill the pacific lumber and national casket in greece could bridge all those cases say can't do it claimed five hundred nine million dollars of iraq was source related to adoption or losses based on a net investment and that's capital contributions to our resource less distributions from a source mit two hundred eighty one million dollars so five hundred nine million dollars of losses claimed on a two hundred eighty one million dollar investment we know that that's understated because those figures come from an exhibit to cain's motion so i think that's a pretty good factual indication that these are duplicated losses so and if i if i may more so that when the rite aid court came and invalidated the regulation altogether so that you had this weighed this gap they're saying that even though the regulation the printer very elation is gone it's alleged preemptive effect remain completely intact so that courts could not rely on ill feld to curb this kind of abuse mean if the temporary regs said something like you know until we fix this speed ahead do whatever you know you could you can take a stop loss you can see you can take a loss without working consolidation reduced under the one to the extent the taxpayer establishes that the loss for basis is not attributable to the recognition a built in gain on the disposition of an asset including stock and securities what do you attribute that to me i interpret that to that that's looking at the general way these cases usually play out is that the losses were taken the subsidiary losses the asset losses were taken first and then the stock was sold outside the group and i think that what that regulation is say it's assuming that that's the order of the transaction if you had all these subsidiary losses beforehand and now you're selling the stock again i think it assumes the usual order of things and that is that you know that the losses the asset losses happened first and then you sold the stock outside question thank you very so looking first at the homework assignment that i got on her back to the bench one point the temporary regulation directed the taxpayer to apply one point five zero to hyphen including the one that you highlighted which again is on one point three three seventy two now we took the formula in that section which was intended to be the duplicated last provision now a political which covered the ill filled situation and we that prescribe the formula in a series of steps we followed those post temporary regulation coming into effect on march seventh two thousand and two you're due to present actions relating to assets and also attempt to take wasis with respect to the disposition of those assets yes and you're saying that the template or you say first that the temporary regulation allows that and therefore it supplants all filled so the temporary rings reg specifically allows you in an intra group situation to say that we can do an asset because position take the losses and it's ok under this  tax court saying pay attention to these consolidated return regulations they control in this situation not mclaughlin not ill felt and when you act in compliance with them we don't want to hear from the i that they want more for provision that they didn't enact or that you know that the point is i'm in good company here in making this point if the i r s wants additional regulatory guidance if they want that they have to enact it but the revelatory guidance that they are if the taxpayer follows it reasonably that's what they're supposed to do and it should be allowed what in the temporary mask you're going work on what in  temporary reg that went into effect in march of zero two allows in an intra group situation the deduction for the asset losses that you claim to know two zero three after having taken stock losses on a one reflects and the i r s i want to make the point again did not disallow any of the losses on the basis that we followed the formula they greet with our basis calculations based stipulated to them principle it is not so free floating license for the i r s to come out in a after the fact with the formula that they gave no notice to the taxpayer of and to clear a regulatory compliance set up to court's own precedents say fidelity to the code is important and that's what brings goddess move into play here that's why our fearless stance is important and on the statute of limitations i'll just say that their construction doesn't hold up under the plain language of the statue and at the very least apart from the revision and goddess woman in on the a calculation of the same konami across that fifty nine point six million dollars production that was disallowed needs to come