about three regulations and the united dominion case and inquired whether those regulations and that case justify a different treatment of the deduction or the loss allowance in this case of course none of the parties to this point had it be instant argument that would have been based on those code sections or that piece to disallow the deduction so the question either of those code sections or united dominion it points firmly in the direction of the allowance of the deductions here because of the emphasis in united on the primacy of the regulations in making th calculation second if these regulations in united dominion over take the analysis here we would request an opportunity to to brief those issues  regulations are specific and they provide for how this loss not only should be taken and be allowed but what in the relevant regulation forgave the rules and regulations for consolidated start with the basic definition of loss that applies to every taxpayer at a separate level or consolidated a level which which regulation or yours would be a thousand one which is proceeds minus basis equals at the group level based on the provisions of section one thirty seven one three three seven d hyphen two teams that was a specific regulation that the i r s pointed us to it was in force at the time these deductions were taken it provided a very specific method of calculating it and the i r s said two things about that three three seventy two talks about a loss that allowed to the consolidated taxpayer at the group level we are that lost the asset the stock it is experienced the complete calculation we submitted that to the i r s or are they signed off on it and agree with it least in in terms of it being regular torrie compliant they said you're right you did calculate this loss correctly under one point three three seventy two your basis adjustments we signed off on under one five zero two hyphen thirty two so to this point were completely regulatory  under the stock loss regulations because the asset the dutchman in fact was a loss on the value of stock it wasn't a sale like the first one was a stock sale the asset loss was loss on st completely the reason that they said that we can't take the loss was not because of the regulations there's never been a really turi noncompliance he raised by the  ok so start with ten sixteen the first section that the court cited that there's a consolidated return regulation that says there shouldn't be duplicated losses and you the taxpayer should make sure that your  a capital loss rate signed off on by the i r s as regulatory compliance because that sale in effect the asset at the basis of it was stock the same thing is true here a sales in two thousand and three resulted in losses on stock that the company holds and those losses are taken at the group level because the regulations tell us that they should be and was the losses already been taken because it was done had a consolidated level using it that way the first time around but it would not have happened that way because of j ten twelve ga says compute equivalent right thus in the case of the stock of subsidiary company the basis there of must be properly adjusted for the amount of the city as companies losses for the years of which consolidated returns were made a good so as you look at consolidated triggers are not made separately instead consolidated amounts are determined for the group as a yes and that's absolutely what happened in this case and that is exactly what one point three three seven b two t direct group level and the basis calculation fifteen zero two hundred thirty two directs group level the stock loss was taken on a different bundle of asset than the asset loss in two thousand and three so these are not double the dutch ins and in fact no one has ever proven that they are they were taken for different transactions were different reasons in full compliance with the inappropriate regulations and that's because the regulations that we followed required us to do exactly what we did that's what separates this case from il felt that's what brings it within united to me and if the s doesn't like that result what they do is they i'm in the regulations they don't correct us somewhere to filing compute and then hang us up after the fact and that of course was the message of united dominion take it at the appropriate level on which we did i r s if you don't like that change the regulations that is also with brings us into goddess woman or applied  who is not confined to penalties on the analysis that we want your honor and he applied research case would be a better one to point to for the goddess for in principle but the way that we took this loss look at woods investment it brings the affirm on the basis of these regulations if we pivot to them because the court doesn't have the record to declare that these are in fact a double dutch and this when i asked you at the outset what was the regulation stock on the base is a calculation that the regulations provide the regulation that specifically controls this your honor is one point three three seven d to  either of two ways one way it was one five zero two as the court mentioned the other way was one point three three seventy two and the r s in its notice in its preamble to the regulations and the bulletin because it would have to be deemed duplicative well i can't go there your honor and i don't mean you avoid the question but what will you do when you're a consolidated filer is you've got a lot of deductions going on or calculations  if if i'm correct thirty's not incommensurate regulation but authorize you to treat an asset say all the way to authorize you to treat a stock sale but it would seem that our decision we case comes down to whether or not we deem a two thousand to two thousand and three sales to in fact be asset sales or stock sales and i'm missing some known i actually understand could issue a set of regulations that specifically point a taxpayer for a transaction which is a loss on stock like this one with a basis calculation attached to it and since this is the allowable loss and this is the calculation that you are required to make after all the consolidated returns or express in that regard we meet that calculation and then the i r s comes back subsequently and says yeah that's ok that you went that route but we can't find an asset loss statu in the way that you started to click in of last is to do the basis calculation which that regulation direction or two we have a specific basis calculation regulation here which determines the stock loss in this on the taxpayer we had it regulatory compliant set of deductions which did not trigger any double deduction consideration if the i r s believed that there were some ad hoc analysis th the bundle of assets that you painted white had in two thousand and one when the stock sale occurred and the bundle of assets that they had in two thousand and three when the assets that were held by a worst and the stock a transaction was done then were different and unless you trace from that first loss to the second one you cannot tell as a matter of fact whether these deductions were taken oh thank you thank you twelve thirty one zero one and the date of the last asset sale which was july thirty one of zero three zero one hundred in a tease had been acquired better going concerns that are now added to that asset poor in quote cain's own tax court petition which is a j seventy eight was sourced stopped making acquisitions in two panels long before the the two thousand and one stocks at their place so there are no additional to the asset pool after the stock sale it's the same pool of assets and so there's there's no need for agreement and to determine the amount of the duplicated loss and i would just reiterate that we know that the entire one hundred ninety nine million dollars stop loss was duplicated precisely because as i believe judge amber just mentioned mccain admits that the group claimed five hundred eighty nine million dollars of act of aqua source related losses based on a net investment of only two hundred and one million dollars now that creates what's called an  of two hundred twenty eight million dollars and duquesne also admits that that excess loss account was eliminated with no tax consequences when paying the ultimate there's this you know it says unless there's a clear declaration of congressional intent to the contrary so it's almost like a hybrid but i do i look at it as as as more than  adjustment rules for the most part displace ten sixteen dash six in the context of consolidated returns i think it i think that rule by general rule in ten sixteen def six has applications outside of the consolidated return context but i mean and that's one reason we didn't rely on on on that regulation but the tax court itself has repeatedly discussed it in the context of consolidated returns  unless the taxpayer can establish that the loss was not attributable to increases in basis the increases in the basis of the stock of the subsidiary resulting from prior asset sales by the subsidiary of appreciated assets that's a completely different problem than what we have here here obviously our resources a off on the sale of subsidiary stock if the if the subsidiary holds devalued assets but it it only applies if after the sale meaning that the subsidiary prior to march through the two days or two months and seven days earlier and as far as the two thousand to two thousand and three asset sales i don't know if the record is is crystal clear on this i mean i know that some if not a chunk of those two thousand to two thousand three losses were from sales of the stock of the lower tier subsidiaries but i was a new person at  sale of assets it was more often or not i wouldn't say it was affirmatively authorized it wasn't disallowed well sure it was the regulation that they waited to that is there not a regulation all good specifically authorized the treatment that they gave to the two thousand and one point is i mean the regulations did not prohibit these the doctrines in two thousand and two and two thousand and three to the extent they were attributable to stock sales  the two thousand and one well again this ten sixteen dash six is a basis adjustment rule and the basis adjustment rules apply when a subsidiary recognizes gains and losses are taken into account you know that has consequences for stock basis for the for the parents basis in the subsidiary stock reason this case is a little bit for is that the the the losses that are being that are they're being claimed again in zero two and three those losses are only recognized when the subsidiary is you know when the stock is sold or when the when the assets are sold so there have been no prior basis adjustments that you would  recognize a loss until the asset is disposed of so there has been players who just the the investment adjustment rules don't catch that piece so i mean  again i i don't i don't look at this as a as a basis adjustment case because basis adjustment is governed by bash thirty two a and and that applies to items of you know playing in the last that that say leave capital losses until consolidated treatment right and then there's nothing that would appear to apply it to how the asset for the amount of the subsidiary companies losses for the years in which consolidated returns were made that's the investment adjustment rules of dash thirty two well intended but it says phrased in a way to  six applied i mean it has i think it's addressed to the same problem that the investment adjustment rules are addressed to that's the best thirty two regs and those are items that have been taken into account here we've got this unrealized loss that you know the value of the assets have gone down and so nothing has gone into the investment adjustment rules yet so i think it's two different  says that the members separate taxable incomes are determined without regard to capital gains and losses and bash twenty two confirms that that capital losses are determined on a consolidated basis so i think you can you don't really have to rely on dash twelve and dash twenty two to get there i mean the single entity treatment here in our view is dictated by ill felt but you know i think the astrovan best twenty two gets you to the same place that authorized the tax treatment reich the realization that authorize the tax treatment of the stock sale in this case right in the yap the oil use well it's a distinction without a difference for purposes will feel fulfilled still controls and i say maybe i don't know yeah i mean again you have this two and a half month gap don't address as opposed to you know i mean in the words investment case i mean you know there were specific basis adjustments that were expressed we call for by the investment adjustment rules and the taxpayer follow those lumber case that they were back to a twenty one twenty one x provision i thought at the twenty one to twenty eight and created it was twenty section twenty three it was similar to what we had one sixty regulation that arrives if a stock to deny the fact that the regulation is applicable or applies to a different situation i think that's a little different than saying like you have in the investment adjustment rules rules investment was just following you know ok you were required to compute as basically explained that to me because i'm i'm not understanding right the stock sale treat that was inconsistent with the regulation or were that our situation where you've got an asset that i'm sorry a subsidiary that holds devalued assets or the losses have not been realized yet that was the last of which they should factor so you had a choice you can either apply the disallows read without that loss duplications factor there or you could apply this three thirty seven b dash to t which again is aimed at a completely different scenario that's that's that's targeting built in game and we're talking about assets that had to created value so fast forward to two in zero three and now you've got two separate rules you've still got the three thirty the remains in the consolidated group and when you recognize the losses again so you know i just think that's different you know you've got i read that just on its face is not applicable i think that's a little different then you know the basis adjustments that went into the woods investment and cases like that i think that's where i draw a distinction and for the questions thank you very seventy two has a calculation in it that refers to the adjustment of basis offsets for income it picks up the transactions that are involved where there is a loss gain or or not and comes up with the amount of the loss that's allowed it is directly on point here and if this asset loss has created a misnomer that that asset losses were reflected in the value of the stock the value of the stock held by the corporation is where the deductions came from and that involved an asset reconciliation of the kind that that council was referring to so the temporary reg said you've got an option here one of the options is as the losses of the subsidiary were right and it went on to prescribe how that would be calculated and then you determine leader whether you can take that at the consolidated level or not now the la regulation that then went off the books one five zero two three to remain on the books and it was the answer what we've heard today is it wasn't a good enough answer but that's why this i it's more like ignited the million or did let's if you want to better answer you've got to redraft the regulations but the fact that the taxpayer followed the existing regulations appropriately pretty transaction and again the basis adjustments are made under yes thirty two to protect the government by reducing the basis and the calculation if that needs improvement ok now in two thousand  where the stock sale of the ira signed off on that in two thousand and two we did exactly what we did in two thousand and three and of the regulations i described and the i r s signed off on that in two  do something that takes the options within one for the same types of assets superstock were asset sales same types of things that you need to have something that tells you specifically you can do a it seems from what the government is saying is that with regard to what you've done nothing told you that you necessarily couldn't do what you did on twelve thirty one zero one  sales no we are talking about losses and adduction is that related to asset sales the asset sales affected the value of the stock the asset value of the stock which is why one three three seventeen to applied because the basis adjustment and the deduction came from the loss of value to the stock that is that they didn't do any tracing they didn't compare yes it's in play in the value of the assets when the stock sale was made as to the value of the assets that were in play when the asset losses were incurred without burden is not on us the i r s carries that burden affirmatively and if they didn't meet it of course this court's precedents established that so we're going to have the lawyers say that a summary judgment which i thought you feld and therefore the deduction should be affirmed we want the court to say because we followed the regulations goddess meant applies so the deduction should be about and we want to court to say if the regulatory compliance goes out and that there is a fact issue still here that requires resolution to that the last thing i will say that there are two things the elation is not on the table it's not part of the briefing or the here in order to do a double deduction analysis you'd have to know the composition the value in the adjusted basis of each asset at the time of the stock sale then you have to know the composition the values and the adjusted basis of each asset at the specific time it was sold and finally you'd have to look at the intervening events between the stock sales any asset sale to see how that impacted the  only then could you make a determination that the deductions work or the same economic loss that's the record we don't have that's the record that we would get on remand you would be reversed