t c no united_states tax_court state farm mutual automobile insurance_company subsidiaries commissioner of internal revenue respondent petitioner v docket no filed date p was the common parent of a life-nonlife consolidated_group from through when making its alternative_minimum_tax amt calculations for those years it originally calculated its adjusted_current_earnings ace_adjustment separately for its life and nonlife subgroups after r issued p a notice_of_deficiency for through p recalculated its amt using a revised methodology p’s revised methodology calculates ace on a consolidated basis and does not apply the loss limitation rules of sec_1503 i r c to preadjustment alternative_minimum_taxable_income amti for purposes of calculating ace p’s revised methodology would reduce its ace_adjustment for and causing larger alternative_tax net operating losses atnols for its nonlife subgroup to be carried back to prior years p’s revised methodology would decrease p’s deficiencies and cause overpayments for through held p must calculate its ace and ace_adjustment on a consolidated basis held further p must use consistent preadjustment amtis when calculating its ace and ace_adjustment jerome b libin james v heffernan mary e monahan and jeffrey n starkey for petitioner alan m jacobson jan e lamartine and william f barry iv for respondent opinion goeke judge respondent determined deficiencies in petitioner’s federal income taxes of dollar_figure dollar_figure dollar_figure and dollar_figure for and respectively petitioner disputes dollar_figure of the deficiency for and the entire deficiency for each of and petitioner claims overpayments of dollar_figure dollar_figure and dollar_figure for and respectively petitioner raised seven issues in its petition five of which have been settled of the two remaining issues this opinion addresses solely the calculation of petitioner’s adjusted_current_earnings ace_adjustment for purposes of computing its alternative_minimum_tax amt the amt issue resolution of the amt issue requires the court to decide two questions whether a consolidated_group consisting of at least one mutual casualty or life_insurance_company and one other corporation a life-nonlife consolidated_group must calculate its ace_adjustment under sec_56 g on a consolidated or subgroup basis we hold that a life-nonlife consolidated_group is entitled to and must calculate its ace_adjustment on a consolidated basis and when a life-nonlife consolidated_group calculates its ace_adjustment whether application of the loss limitation rules of sec_1503 and sec_1_1502-47 income_tax regs loss limitation rules allows it to use one method to calculate preadjustment alternative_minimum_taxable_income amti for purposes of calculating ace under sec_56 and a different method to calculate preadjustment amti for purposes of comparing preadjustment amti with ace under sec_56 we hold that a life-nonlife consolidated_group must use the same method to calculate preadjustment amti for both purposes background the parties submitted this case fully stipulated under rule the stipulation of facts and the accompanying exhibits are incorporated herein by this reference petitioner is an illinoi sec_1 unless otherwise indicated all section references are to the internal_revenue_code code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure mutual property and casualty insurance_company taxed as a corporation its principal office is in bloomington illinois during the years through petitioner was the common parent of an affiliated_group_of_corporations that included two domestic life_insurance_companies taxable under sec_801 life subgroup and a varying number of domestic nonlife insurance_companies and other domestic corporations nonlife subgroup and together with the life subgroup consolidated_group pursuant to an election made for under sec_1504 the consolidated_group has filed life-nonlife consolidated federal_income_tax returns returns for and all subsequent years petitioner timely filed returns for through on forms 1120-pc u s property and casualty insurance_company income_tax return the forms 1120-pc for the consolidated_group included both the life and nonlife subgroups for and petitioner subsequently filed forms 1120x amended u s_corporation income_tax return for the consolidated_group for through petitioner’s returns reflected a liability for regular income_tax which was reduced by amt credits under sec_53 for and petitioner’s returns reflected a liability for amt under sec_55 for and petitioner’s returns reflected a liability for regular income_tax that was reduced by amt credits under sec_53 petitioner paid the taxes shown on its returns for each year for each of the years through petitioner made its amt calculations on form_4626 alternative minimum tax-- corporations for purposes of calculating the consolidated group’s amt for through petitioner prepared supporting schedules reflecting figures for the separate companies and for the life and nonlife subgroups the forms filed for taxable years through show that petitioner had positive regular taxable_income and amti2 for both subgroups for that reason petitioner claims that the amounts shown on the forms for through represented an aggregate of the amounts computed for both subgroups on the form_4626 for petitioner reflected the amt computations shown on a supporting schedule that included an ace_adjustment although the supporting schedule showed a negative regular taxable_income for the nonlife subgroup and a positive amount of regular taxable_income for the life subgroup the schedule showed positive amti for both subgroups as a result of the ace_adjustment because both subgroups had positive amt income petitioner did not apply the loss limitation rules which the amti reported on forms is amti as defined in sec_55 including the ace_adjustment and the alternative_tax_net_operating_loss_deduction generally require a taxpayer to calculate its consolidated_taxable_income by aggregating the taxable_income of both subgroups only if the taxable_income of both subgroups is positive therefore the amounts shown on the form_4626 for were an aggregate of the amounts computed for both subgroups on the form_4626 for petitioner reflected the amt computations shown on the supporting schedules that included an ace_adjustment the supporting schedules showed negative regular taxable_income and amt income for the nonlife subgroup and positive regular taxable_income and amt income for the life subgroup the respective nonlife consolidated net operating losses nols for regular taxable_income and amt purposes were carried back and deducted in the determination of nonlife consolidated regular taxable_income and amt income in prior years the respective nonlife consolidated net operating losses for regular taxable_income and amt purposes for thus could not be set off against the respective positive life subgroup regular taxable_income and amt income for because the nonlife subgroup’s amt income was negative petitioner applied the loss limitation rules and the amounts shown on the form_4626 for represented solely the amounts computed for the life subgroup on the form_4626 for petitioner reflected the amt computations shown on the supporting schedules that included an ace_adjustment for the year the supporting schedules showed negative regular taxable_income and amt income for the nonlife subgroup and positive regular taxable_income and amt income for the life subgroup for regular_tax purposes a portion of the nonlife consolidated nol for was carried back and deducted in the determination of nonlife consolidated regular taxable_income in prior years and another portion of the nonlife consolidated nol for the year was set off against life subgroup regular taxable_income for subject_to the percentage limitations of sec_1503 for amt purposes the entire amount of the nonlife consolidated nol for was carried back and deducted in the determination of nonlife consolidated amt income in prior years because the nonlife subgroup’s amt income was negative petitioner applied the loss limitation rules and the amounts shown on the form_4626 for represented solely the amounts computed for the life subgroup the allowable regular_tax setoff of nonlife subgroup loss against life subgroup income was not reflected on form_4626 for respondent audited petitioner’s returns for through and issued a notice_of_deficiency with respect to those years on date the notice_of_deficiency did not contain any adjustments with respect to the amt issue petitioner originally calculated its amt by making separate calculations for ace and the ace adjustments for each subgroup an illustration of petitioner’s original methodology for and is provided in the appendix to this opinion petitioner first calculated post-ace adjustment amtis before the alternative_tax net_operating_loss atnol deduction for both the life and nonlife subgroups for years through both subgroups had positive post-ace adjustment amtis therefore the post-ace adjustment amti of the consolidated_group was the sum of the post-ace adjustment amtis of the two subgroups for and the nonlife subgroup had negative post-ace adjustment amtis therefore petitioner applied the loss limitation rules and treated the post-ace adjustment amti of the life subgroup as the post-ace adjustment amti of the entire consolidated_group accordingly in the illustrations of petitioner’s original calculations in the appendix the consolidated column is identical to the life subgroup column for and petitioner used the atnol of the nonlife subgroup to offset nonlife subgroup income in prior years pursuant to the loss limitation rules after it filed its returns petitioner recalculated its ace adjustments by calculating a single ace and ace_adjustment for the entire consolidated_group petitioner’s revised methodology petitioner then allocated the consolidated ace_adjustment between all of the figures on the charts in the appendix are for illustrative purposes only the life and nonlife subgroups according to the sec_56 adjustments attributable to each subgroup petitioner’s revised methodology also differs from its original calculations in that it does not apply the loss limitation rules to preadjustment amti when calculating ace but continues to apply the loss limitation rules to preadjustment amti when comparing preadjustment amti with ace an illustration of petitioner’s revised methodology is provided in the appendix petitioner’s revised methodology if accepted would create negative ace adjustments to be taken into account in the calculation of the nonlife subgroup consolidated atnols for and which would increase the atnols for the nonlife subgroup for those years this would create carrybacks of nonlife subgroup atnols from and in excess of the carrybacks initially claimed on the forms corporation application_for tentative refund that petitioner filed for those years as a result petitioner’s deficiency for would be reduced its deficiencies for through would be eliminated and petitioner would have made overpayments in and that would be largely attributable to the amt issue petitioner timely filed its petition on date reflecting its revised methodology discussion i legal background a the amt congress expanded the amt as a part of the tax_reform_act_of_1986 publaw_99_514 100_stat_2085 in order to prevent taxpayers with substantial economic_income from avoiding significant tax_liability by using exclusions deductions and credits see 105_tc_16 affd 98_f3d_194 5th cir the amt equals the excess of the tentative_minimum_tax over the regular_tax for the year sec_55 for corporations the tentative_minimum_tax is percent of so much of amti as exceeds the exemption_amount reduced by the amt foreign_tax_credit for the year sec_55 amti is the taxable_income of the taxpayer for the year determined with the adjustments provided in sec_56 and sec_58 and increased by the amount of items of tax preference in sec_57 sec_55 sec_56 governs the ace_adjustment to amti preadjustment amti is the taxpayer’s amti determined under sec_55 but before adjustments for ace atnol or the alternative_energy deduction sec_1_56_g_-1 income_tax regs ace equals amti plus or minus the adjustments provided in sec_56 but without regard to the rest of sec_56 or the atnol deduction sec_56 sec_56 provides that the amti of any corporation for the taxable_year shall be increased by percent of the excess of the corporation’s ace over the corporation’s preadjustment amti sec_56 also allows a negative ace_adjustment if a taxpayer’s amti exceeds its ace but only to the extent of the excess of aggregate positive ace adjustments over aggregate negative ace adjustments for the taxpayer in prior years for purposes of this opinion post-ace adjustment amti is preadjustment amti plus or minus the ace_adjustment but without any atnol adjustments the disputes in this case involve the calculation of the ace_adjustment by life-nonlife consolidated groups the first issue is whether ace and the ace_adjustment may be calculated on a consolidated basis a single ace and ace_adjustment for the entire consolidated_group or on a subgroup basis two aces and ace adjustments one for the life subgroup and one for the nonlife subgroup the second issue is whether life-nonlife consolidated groups must use the same amti when calculating ace in sec_56 as when comparing amti to ace to calculate the ace_adjustment in sec_56 and b consolidated_returns generally consolidated groups calculate a single amount of taxable_income consolidated_taxable_income or cti and a single amount of tax_liability sec_1_1502-2 sec_1_1502-11 income_tax regs to calculate cti each member computes its separate_taxable_income subject_to certain modifications listed in sec_1_1502-12 income_tax regs sec_1_1502-11 income_tax regs the separate taxable incomes of the members are then aggregated with other items listed in sec_1_1502-11 income_tax regs a single consolidated atnol is generally calculated for the consolidated_group sec_1_1502-11 sec_1_1502-21 income_tax regs sec_1501 permits groups with both life and nonlife members to file consolidated_returns if an appropriate election is made under sec_1504 see 119_tc_342 105_fedappx_67 7th cir for a more detailed background on life-nonlife consolidated_returns however sec_1503 limits the ability of consolidated groups to use losses from the nonlife subgroup to offset the income of the life subgroup it provides that if the nonlife subgroup has an nol for the year the nol must first be carried back and used to offset income of the nonlife subgroup in prior years to the extent that the nol is not fully absorbed by nonlife income it may be used to offset life income for the year but nly to the extent of percent of the nol or percent of the taxable_income of the life subgroup whichever is less the unused portion of the nonlife subgroup’s nol is available as a carryover to future years sec_1503 requires a taxpayer filing a consolidated_return to determine its tax in accordance with the regulations under sec_1502 sec_1_1502-47 income_tax regs generally adopts a subgroup_method for determining cti of life- nonlife consolidated groups sec_1_1502-47 income_tax regs it divides the consolidated_group into the life subgroup which consists of members of the group that are life_insurance_companies as defined in sec_801 life companies and the nonlife subgroup which consists of all members that are not life companies sec_1_1502-47 through income_tax regs the cti for the consolidated_group is the sum of nonlife cti as set off by allowable life losses consolidated partial life_insurance_company_taxable_income licti as set off by allowable life losses and amounts subtracted under sec_815 from life policyholders’ surplus accounts phase income sec_1_1502-47 income_tax regs nonlife cti aggregates the separate taxable incomes of the nonlife members with specified consolidated adjustments and incorporates reductions for current_year nonlife consolidated nol and for nonlife consolidated net operating and capital_loss carrybacks and carryovers sec_1_1502-47 income_tax regs see also sec_1_1502-11 sec_1_1502-12 sec_1_1502-21a sec_1_1502-22a income_tax regs consolidated partial licti is generally the aggregate of the separate net_income of the life members reduced by life loss_carrybacks and carryovers from other years secs e see also state farm i pincite the taxable_income of each subgroup may then be set off by losses of the other subgroup in accordance with sec_1_1502-47 and n income_tax regs sec_1_1502-47 income_tax regs provides that the life-nonlife regulations sec_1_1502-47 income_tax regs preempt any inconsistent rules in the other consolidated_return_regulations however this preemption rule applies only where the life-nonlife regulations so provide in all other cases the general consolidated_return rules apply sec_1_1502-47 income_tax regs c state farm i the issues before us are matters of first impression in this court however the court previously addressed the interaction between the amt and life-nonlife consolidated groups in state farm i while the court in state farm i did not consider the calculation of the ace_adjustment by life-nonlife consolidated groups petitioner argues that the court’s prior decision is persuasive and we agree during the years at issue in state farm i and sec_56 required a book_income_adjustment which has since been repealed and replaced by the ace_adjustment discussed above state farm i pincite sec_56 provided sec_56 adjustments for book income of corporations -- in general --the alternative_minimum_taxable_income of any corporation for any taxable_year beginning in or shall be increased by percent of the amount if any by which-- a the adjusted_net_book_income of the corporation exceeds b the alternative_minimum_taxable_income for the taxable_year determined without regard to this subsection and the alternative_tax_net_operating_loss_deduction adjusted_net_book_income --for purposes of this subsection-- a in general --the term adjusted_net_book_income means the net_income or loss of the taxpayer set forth on the taxpayer’s applicable_financial_statement adjusted as provided in this paragraph c special rules for related corporations -- i consolidated_returns --if the taxpayer files a consolidated_return for any taxable_year adjusted_net_book_income for such sec_56 was enacted as part of the tax_reform_act_of_1986 publaw_99_514 100_stat_2320 and repealed by the omnibus budget reconciliation act of publaw_101_508 sec a stat taxable_year shall take into account items on the taxpayer’s applicable_financial_statement which are properly allocable to members of such group included on such return while the book_income_adjustment closely resembled the ace_adjustment it was different in two ways that are relevant here first the book_income_adjustment could not be negative sec_56 provided for an increase in amti when the adjusted book income exceeded amti but did not provide for a decrease in amti when the reverse was true by contrast the ace_adjustment may be negative when preadjustment amti exceeds ace but the reduction in amti may not exceed the excess if any of the aggregate positive ace adjustments for prior taxable years over the aggregate negative ace adjustments for prior taxable years sec_56 the fact that the book_income_adjustment could not be negative meant that when the net book income of one of a taxpayer’s subgroups was smaller than its amti which would create a negative book_income_adjustment but for the absence of a provision allowing such adjustments and the other subgroup had a positive book_income_adjustment the taxpayer could take advantage of what would have been a negative book_income_adjustment for the first subgroup only if it could aggregate the book income adjustments of the subgroups this may still be a problem for some consolidated life-nonlife groups that are subject_to the current ace_adjustment regime if ace is calculated on a subgroup basis but only if a subgroup does not have sufficient positive ace adjustments in prior years to absorb a negative ace_adjustment second the book_income_adjustment was a percentage of the difference between the taxpayer’s adjusted_net_book_income and its amti instead of the difference between ace and amti unlike ace a taxpayer’s adjusted_net_book_income had no relation to amti and was based in financial_accounting principles instead of tax principles therefore there was no question of whether the same amti was used in calculating the net_income or loss on the taxpayer’s financial statement as was used in calculating the book income adjustment--amti was only used for the latter purpose in state farm i petitioner argued that the book_income_adjustment should be computed on a consolidated basis with a single adjustment for the entire group on the basis that the statute and the regulations generally referred to a single_taxpayer and its single consolidated net book income state farm i pincite respondent argued that the book_income_adjustment should be calculated on a subgroup basis with separate book income adjustments for each subgroup on account of the need to respect the loss limitation rules id the court found petitioner’s argument more persuasive while neither the statute nor the regulations specifically addressed the calculation of the book_income_adjustment by life- nonlife consolidated groups all of the references to the book_income_adjustment suggested that consolidated groups should calculate a single consolidated book_income_adjustment based on the taxable_income of the consolidated_group and the consolidated adjusted_net_book_income derived from the financial statement of the common parent id pincite see also sec_1 b i through iii c i income_tax regs the court was also persuaded by an example in the regulations that indicated that members of a consolidated_group were to calculate their book_income_adjustment on a consolidated basis even when the amti of one of the members exceeded its net book income and another member had a positive book_income_adjustment state farm i pincite citing sec_1 a example income_tax regs while the plain language of the code and the regulations made it clear that for most consolidated groups the book_income_adjustment should be calculated on a consolidated basis the court also considered whether an exception to this general_rule applied to life-nonlife groups id the court considered the relationship between the operating loss rules in the regular_tax and amt systems and explained two principles thus emerge from the confluence of the organization and the underlying legislative_history of sec_56 first the book_income_adjustment must be taken into account in computing the atnol arising in a given year and available for carrying to other years or the amount of amti available in a given year for absorbing amounts carried from other years second the loss limits of sec_1503 must be respected in calculating such atnol or amti neither party disputes these premises id pincite the court then faced the question of whether the treatment of the subgroups as separate groups for purposes of applying the loss limitation rules required that this framework be maintained only up to calculation of the book_income_adjustment as petitioner argued or through it as respondent argued id pincite the court concluded that because the general_rule is to calculate the book_income_adjustment of a consolidated_group on a consolidated basis and sec_1_1502-47 income_tax regs preempts the general consolidated_return rules for calculating taxable_income not for calculating the book_income_adjustment the general_rule for calculating book income adjustments on a consolidated basis prevailed id sec_1_1502-47 and r income_tax regs the court noted that the amt regulations were promulgated after those for life-nonlife groups and the commissioner had been made aware of this issue by a comment received after the issuance of temporary amt regulations state farm i pincite see also field serv adv mem tr-45-1815-95 date the court recognized that calculating the book_income_adjustment on a consolidated basis could make it more difficult to apply the loss limitation rules but noted that allocation of the consolidated book_income_adjustment between the subgroups was a satisfactory solution state farm i pincite after the court filed its opinion in state farm i a dispute arose during the submission of calculations pursuant to rule regarding the calculation of preadjustment amti the parties disputed the meaning of the statement in the court’s opinion that the definition of preadjustment amti implies the regular taxable_income of the full consolidated_group id pincite petitioner interpreted this to mean that preadjustment amti should be based on the amount of taxable_income that would be calculated for the consolidated_group under the regular_tax regime because the nonlife subgroup had a net_operating_loss in petitioner applied the loss limitation rules and calculated its preadjustment amti as including only consolidated partial licti by contrast respondent aggregated the taxable incomes of the subgroups essentially applying the general_rule that applies to consolidated groups in sec_1_1502-11 income_tax regs the court agreed with petitioner and held the text of sec_1 b income_tax regs as well as the general operation of the amt regime suggests as a starting point the taxable_income of the group as computed for regular_tax purposes further although the life-nonlife provisions in sec_1_1502-47 income_tax regs do not preempt the amt regulations they do preempt inconsistent rules in sec_1_1502-1 through income_tax regs sec_1_1502-47 q r income_tax regs resort to sec_1_1502-11 income_tax regs is thus not justified state farm i rule decision dated date respondent appealed the court’s state farm i decision and the u s court_of_appeals for the seventh circuit affirmed 105_fedappx_67 7th cir the court_of_appeals adopted the reasoning set forth in this court’s opinion and noted that the references to taxable_income of the consolidated_group and consolidated_returns in sec_1 b iii income_tax regs and sec_56 respectively supported the court’s rejection of respondent’s subgroup approach id pincite the court_of_appeals stated that respondent’s argument was essentially equitable and outcome-based and declined to override the express language of the regulations id pincite ii the issues petitioner and respondent disagree on two issues whether the ace_adjustment under sec_56 should be computed by treating the nonlife and life subgroups as separate groups or a single consolidated_group and if they are to be treated as a consolidated_group whether they should be consolidated using the principles of sec_1_1502-11 or sec_1_1502-47 income_tax regs and whether the loss limitation rules apply to amti for purposes of both comparing amti with ace and computing ace while petitioner and respondent disagree on how to calculate the ace_adjustment for all of the years through their calculations yield the same result for through because both subgroups had positive post-ace adjustment amtis for each of those years therefore this analysis focuses on and because those years best illustrate the divergences in the parties’ methodologies however our decision is equally applicable to through furthermore while petitioner and respondent disagree on whether the adjustments under sec_56 should be calculated on a consolidated or subgroup basis they agree that the amounts of the adjustments under sec_56 should first be calculated for each company and they agree on the results of those calculations iii calculation of ace and the ace_adjustment petitioner’s position is that its ace_adjustment for through should be calculated using a consolidated methodology after it filed its returns for those years petitioner revised its computations to reflect its current position petitioner has not filed any return for through in which the ace_adjustment was calculated according to its current position respondent’s position is that calculation of the ace_adjustment including calculation of the consolidated preadjustment amti for each of the years through should be determined on a subgroup basis by treating each of the subgroups as a separate consolidated_group alternatively respondent’s position is that a consolidated method may be used to calculate the ace_adjustment as long as a consistent amount for preadjustment amti is used petitioner argues that a life-nonlife consolidated_group must make its ace_adjustment on a consolidated basis because the general_rule for consolidated groups is that the ace_adjustment is made on a consolidated basis and nothing in the code or the regulations preempts this rule as it applies to life-nonlife consolidated groups see sec_1_1502-47 and r income_tax regs furthermore petitioner argues that the legislative_history of sec_56 the pertinent regulations and state farm i support its position that the ace_adjustment be made on a consolidated basis for consolidated groups the ace regulations provide that positive ace adjustments are calculated as follows n adjustment for adjusted_current_earnings of consolidated groups-- positive adjustments --for taxable years beginning after date the alternative_minimum_taxable_income of a consolidated_group as defined in sec_1_1502-1t is increased by percent of the excess if any of-- i the consolidated adjusted_current_earnings for the taxable_year over ii the consolidated pre-adjustment alternative_minimum_taxable_income for the taxable_year sec_1 g - n income_tax regs emphasis added the regulations also provide that negative ace adjustments are similarly calculated by reference to consolidated amounts sec_1_56_g_-1 income_tax regs however the sec_56 regulations make no reference to life-nonlife subgroups in particular see sec_1_56_g_-1 income_tax regs sec_1_1502-1t temporary income_tax regs fed reg date has been replaced by sec_1_1502-1 income_tax regs which defines a consolidated_group as a group filing or required to file consolidated_returns for the tax_year the parties do not dispute that petitioner’s life and nonlife subgroups were part of a single consolidated_group that was required to file a single consolidated_return for each of the taxable years through while there are now proposed_regulations that provide additional guidance on how consolidated groups should calculate the ace_adjustment sec_1_1502-55 proposed income_tax regs fed reg date like the current regulations they do not provide any particular guidance for life-nonlife consolidated groups petitioner argues that the general_rule applies to life- nonlife subgroups because nothing in sec_1_1502-47 income_tax regs preempts it sec_1_1502-47 income_tax regs provides that the life-nonlife regulations preempt any inconsistent consolidated_return_regulations specifically sec_1_1502-0 through income_tax regs however sec_1_1502-1t temporary income_tax regs was originally published on date t d 1990_1_cb_66 when finalized on date the regulation was redesignated sec_1_1502-1 income_tax regs t d 1990_2_cb_57 the temporary and final regulations are identical there is no reference to the ace_adjustment in the consolidated_return_regulations for the life-nonlife regulations to preempt furthermore sec_1_1502-47 income_tax regs provides that life-nonlife consolidated groups must follow the general rules that apply to consolidated groups unless the life-nonlife regulations specifically provide otherwise petitioner also argues that the legislative_history of sec_56 supports its methodology the conference_report states the determination of whether a consolidated_group is eligible to decrease alternative_minimum_taxable_income as a result of alternative_minimum_taxable_income exceeding adjusted_current_earnings is expected to be made at the consolidated level h conf rept vol ii at ii-278 1986_3_cb_1 emphasis added this history indicates that congress intended that members of a consolidated_group that had perpetually negative ace adjustments would be allowed to consolidate their ace adjustments with those of the rest of the group there is no indication that congress intended to deny this privilege to life-nonlife consolidated groups in fact the conference_report contains a discussion of special rules for life_insurance_companies making an ace_adjustment none of which are relevant in this case a few pages before the text quoted above suggesting that congress was aware of the problems that arise when life_insurance_companies make ace adjustments but that congress did not believe that there was a need to make special ace rules for life-nonlife subgroups id at ii-277 c b vol pincite petitioner also argues that state farm i should guide our decision because the book_income_adjustment and the ace_adjustment parallel each other just as was true for the book income regulations the commissioner issued ace regulations that clearly call for a consolidated_group to make a single consolidated ace_adjustment and that are silent as to whether an exception is made for life-nonlife groups sec_1_56_g_-1 income_tax regs we agree that the court’s decision in state farm i is also instructive here while as respondent points out state farm i dealt with a statute that has been repealed and did not address the ace_adjustment the book_income_adjustment and the ace_adjustment are similar in three important ways both adjustments were intended to serve the same purpose--to tax profits that are reported for financial_accounting purposes but would otherwise be untaxed see h conf rept vol ii supra at ii-273 to ii-274 c b vol pincite both adjustments are calculated on a consolidated basis for regular consolidated groups see sec_1 a g - n income_tax regs and there is nothing in the code the regulations or any legislative_history that indicates that the adjustments should be calculated differently depending on whether the consolidated_group is a life-nonlife consolidated_group because it is possible to give the loss limitation rules effect while calculating ace on a consolidated basis by allocating the ace_adjustment when the loss limitation rules apply as illustrated by respondent’s alternative methodology in the appendix there is no reason to treat life-nonlife consolidated groups differently from other consolidated groups in the absence of an express directive in the code or the regulations see sec_1_1502-47 and r income_tax regs while acknowledging that neither the code nor the regulations provide a specific method for calculating the ace_adjustment for a life-nonlife consolidated_group respondent argues that because sec_1_1502-47 income_tax regs requires a subgroup approach for life-nonlife consolidated groups for regular_tax purposes using the subgroup_method for the ace_adjustment best parallels that regime in response to arguments that sec_1_1502-47 income_tax regs is inconsistent with the usual method of consolidation the drafters of the regulations noted that it is sec_1503 which is inconsistent with the basic principle of consolidation and therefore the usual method of consolidation is not really relevant preamble to the final regulations t d 1983_1_cb_207 the drafters explained that to a large extent the nonlife members and the life members are treated as if they were two separate groups with certain exceptions id c b pincite therefore the usual rules that apply to other consolidated groups do not necessarily apply to life-nonlife consolidated groups respondent argues that calculation of the ace_adjustment is one of the situations where the usual rules that apply to most consolidated groups do not apply to life- nonlife consolidated groups respondent argues further support for his position is found in sec_1_55-1 income_tax regs which states a general_rule for computing alternative_minimum_taxable_income --except as otherwise provided by statute regulations or other published guidance issued by the commissioner all internal_revenue_code provisions that apply in determining the regular taxable_income of a taxpayer also apply in determining the alternative_minimum_taxable_income of the taxpayer sec_1_56_g_-1 income_tax regs similarly provides that all rules that apply for purposes of determining regular taxable_income also apply in determining ace because sec_1_1502-47 income_tax regs requires the subgroup_method for determining cti for regular_tax purposes respondent argues that the subgroup_method also applies for determining the ace_adjustment which constitutes part of a taxpayer’s post-ace adjustment amti however while amti is essentially the amt’s equivalent to cti and therefore it is appropriate to apply sec_1 g income_tax regs when calculating preadjustment amti there is no regular_tax provision that is equivalent to the ace_adjustment some of the adjustments in sec_56 are based on regular_tax provisions but the ace_adjustment itself simply has no regular_tax counterpart it does not follow from the fact that amti must be calculated on a subgroup basis that ace must also be calculated on a subgroup basis in the absence of any supporting authority respondent’s alternative methodology illustrates that ace can be calculated on a consolidated basis and then allocated between the subgroups in order to arrive at accurate post-ace adjustment amtis for each subgroup in the absence of any clear guidance on exactly how to calculate ace petitioner’s method is reasonable except for that fact that as discussed in the next section petitioner uses inconsistent preadjustment amtis when calculating ace see 77_tc_1149 respondent also argues that the subgroup methodology is necessary in order to give effect to the loss limitation rules as discussed in section iv c the subgroup_method and the loss limitation rules must be respected when calculating amt for that reason post-ace adjustment amti must be calculated for each subgroup to determine whether the loss limitation rules apply even if a taxpayer ultimately calculates its amt by aggregating the income adjustments and other tax items for both subgroups the taxpayer must first calculate post-ace adjustment amti for each of the subgroups to determine whether either subgroup has a negative separate post-ace adjustment amti which would mean that the taxpayer would have to apply the loss limitation rules and treat its consolidated amti as the amti of the subgroup with positive separate post-ace adjustment amti however calculating separate post-ace adjustment amtis for the subgroups does not require that the taxpayer also calculate a separate ace_adjustment for each subgroup as illustrated by petitioner’s revised methodology for and a taxpayer may calculate separate post-ace adjustment amtis for the subgroups using a single ace_adjustment by allocating the ace_adjustment between the subgroups therefore it is not necessary to adopt a subgroup methodology for calculating the ace_adjustment in order to calculate post-ace adjustment amtis for each subgroup and give effect to the loss limitation rules respondent also argues that the preamble to sec_1 proposed income_tax regs fed reg date provides guidance for life-nonlife consolidated groups and supports his methodology the preamble states the service believes that congress generally intended the amt and adjusted_current_earnings ace systems to be separate from and parallel to the regular_tax system accordingly under the separate and parallel principle all of the provisions of the internal_revenue_code code and regulations apply in determining consolidated alternative_minimum_taxable_income amti and consolidated ace unless the service provides otherwise in regulations or other guidance the preamble further explains that the proposed_regulations do not specifically address life-nonlife consolidated groups but the rules of sec_1_1502-47 income_tax regs apply to consolidated groups under the amt and ace systems while we agree that sec_1_1502-47 income_tax regs continues to apply under the amt and ace systems and therefore amti must be calculated for each subgroup in order to apply the loss limitation rules it does not necessarily follow that ace must be calculated on a subgroup basis the preamble to the proposed regulation specifically mentions life-nonlife consolidated groups yet it does not create any special rules for calculating ace for life-nonlife consolidated groups respondent also argues that the requirement in sec_1_1502-47 income_tax regs that the nonlife subgroup file a separate form_1120 u s_corporation income_tax return or form 1120-m u s mutual_insurance_company income_tax return and the life subgroup file a separate form 1120-l u s life_insurance_company income_tax return supports his argument that ace must be calculated by subgroup if petitioner had filed separate forms for each of the subgroups it would have also prepared and filed separate forms for each subgroup if petitioner had prepared and filed separate forms respondent argues that petitioner would have calculated separate ace adjustments for each subgroup because form_4626 has lines for the corporation’s ace_adjustment we do not find that sec_1_1502-47 income_tax regs carries this much significance as suggested in state farm i and as illustrated by the parties’ calculations in the appendix petitioner may calculate a consolidated ace_adjustment and then allocate it between the two subgroups the amount of the ace_adjustment allocated to each subgroup could be used to complete each subgroup’s form_4626 respondent also argues that because congress enacted sec_1503 in and the amt in it must have been aware of subgroups when it created the rules for making an ace_adjustment further it most likely assumed that ace calculations would be computed by subgroup and that no separate explanation for life- nonlife consolidated groups was necessary however we do not find this theory any more convincing than petitioner’s argument that congress most likely assumed that the ace calculations would be computed on a consolidated basis and that no separate explanation for life-nonlife consolidated groups was necessary there simply is no clear indication of how congress intended life-nonlife affiliated groups to calculate the ace_adjustment tax reform act of publaw_94_455 sec b 90_stat_1740 tax_reform_act_of_1986 publaw_99_514 100_stat_2320 respondent believes that his argument is supported by sec_1503 which provides in general --if an election under sec_1504 is in effect for the taxable_year and the consolidated_taxable_income of the members of the group not taxed under sec_801 the nonlife subgroup results in a consolidated_net_operating_loss for such taxable_year then under regulations prescribed by the secretary the amount of such loss which cannot be absorbed in the applicable carryback periods against the taxable_income of such members not taxed under sec_801 the nonlife subgroup shall be taken into account in determining the consolidated_taxable_income of the affiliated_group for such taxable_year to the extent of percent of such loss or percent of the taxable_income of the members taxed under sec_801 the life subgroup whichever is less emphasis added the term consolidated in sec_1503 is used to refer to both the separate subgroups and to the entire affiliated_group furthermore the term consolidated is generally used to refer to the subgroups throughout sec_1_1502-47 income_tax regs see sec_1_1502-47 and ii d g and h k l m n o i and ii i and ii income_tax regs cf sec_1_1502-47 b i and ii d f g o r income_tax regs respondent argues that this undermines petitioner’s argument that the use of the term consolidated adjusted_current_earnings in sec_1_56_g_-1 and ii income_tax regs refers to the consolidated ace of the entire affiliated_group we agree that the use of the term consolidated is ambiguous however in sec_1503 and sec_1_1502-47 income_tax regs when the term consolidated is used to refer to a subgroup it is immediately apparent because it is used in conjunction with a reference to a subgroup see sec_1503 consolidated_taxable_income of the members of the group not taxed under sec_801 sec_1 g nonlife_consolidated_taxable_income and consolidated partial licti income_tax regs in the absence of any references to subgroups in sec_1_56_g_-1 income_tax regs we find it more likely that consolidated adjusted_current_earnings refers to the ace of the entire consolidated_group respondent next argues that because sec_1 g - n i income_tax regs references sec_1_1502-11 income_tax regs which is preempted by sec_1_1502-47 income_tax regs all references to a group in the sec_56 and the ace regulations should be read as referring to either the life subgroup or the nonlife subgroup however in the absence of any clear indication that this was congress’s intention we decline to alter the plain meaning of sec_56 and the ace regulations by substituting references to subgroups for references that indicate the entire consolidated_group respondent argues alternatively that if the court decides that it is appropriate to calculate the ace_adjustment using a consolidated method the court may wish to use sec_1_1502-11 income_tax regs instead of sec_1_1502-47 income_tax regs to calculate preadjustment amti this would require taxpayers to add the taxable incomes of the subgroups together to calculate preadjustment amti even if one subgroup has a negative post-ace adjustment amti as discussed in more detail in section iv c because sec_1_1502-47 income_tax regs preempts any inconsistent consolidated_return_regulations we find that sec_1_1502-47 income_tax regs preempts sec_1 income_tax regs whenever the amt requires a calculation of taxable_income for life-nonlife consolidated groups for regular_tax purposes such as when calculating amti sec_1_1502-47 income_tax regs therefore respondent’s alternative methodology using sec_1_1502-11 income_tax regs to calculate preadjustment amti is inappropriate respondent argues as a third alternative that the court may rule that the ace_adjustment should be calculated on a consolidated basis and that the loss limitation rules should apply when calculating amti as long as a consistent amti is used respondent’s alternative methodology is illustrated in the appendix we believe that respondent’s third alternative represents the best way to calculate the ace_adjustment iv application of the loss limitation rules to amti a petitioner’s revised methodology petitioner’s revised methodology on the second issue is illustrated in the appendix petitioner argues that the loss limitation rules apply when calculating preadjustment amti for purposes of comparing with ace line sec_3 and of petitioner’s revised methodology in the appendix but that they do not apply when calculating preadjustment amti for purposes of calculating ace line of petitioner’s revised methodology in the appendix under petitioner’s revised methodology it sec_2001 amti for the consolidated_group before the atnol deduction is about dollar_figure million compared to dollar_figure million as it originally calculated under both its revised and original calculations both illustrated in the appendix petitioner’ sec_2001 amti is attributable solely to the life subgroup because the nonlife subgroup suffered an atnol in which will be carried back to offset the nonlife subgroup’s gains in prior years petitioner argues that under its revised methodology the amti before the atnol deduction attributable to the nonlife subsidiary is negative dollar_figure billion compared to its original calculation of negative dollar_figure billion these adjustments combined with similar adjustments for would result in a larger nol_carryback to all figures in this section are for illustrative purposes only the parties agree that petitioner’s actual tax_liability or refund will be determined in a rule calculation prior years which would reduce petitioner’s deficiency in and produce overpayments in and for both and on line of petitioner’s methodology in the appendix preadjustment amti to compare with ace includes only the life subgroup’s preadjustment amti because petitioner applied the loss limitation rules sec_1_1502-47 income_tax regs provides that the cti of a life- nonlife consolidated_group includes the separate ctis of each of the subgroups but neither subgroup’s cti may be less than zero therefore because the nonlife subgroup had a negative cti in both and its taxable_income is treated as being zero for purposes of calculating the consolidated group’s cti however on line of petitioner’s methodology for and in the appendix preadjustment amti to calculate ace petitioner added the preadjustment amtis of the nonlife and life subgroups without applying the loss limitation rules this is the source of the second issue respondent argues that if petitioner calculates its ace_adjustment using a consolidated method petitioner must use the same preadjustment amti on line sec_3 and petitioner’s argument as to why its methodology is appropriate is discussed in section iv c and d line the sec_56 adjustments represents the combined sec_56 adjustments of the consolidated_group in about dollar_figure billion of the adjustments was attributable to the nonlife subgroup and dollar_figure was attributable to the life subgroup on line petitioner allocates the ace_adjustment between the nonlife and life subgroups according to the sec_56 adjustments attributable to prevent the distortion that would otherwise be caused when using a consolidated ace_adjustment when the loss limitation rule applies see state farm i pincite on line as on line petitioner applies the loss limitation rules and shows that petitioner’s post-ace adjustment amti for and for the consolidated_group includes only the life subgroup’s income and adjustments because the nonlife subgroup had no taxable_income line sec_11 and sec_12 of petitioner’s revised methodology for illustrate the use of the nonlife subgroup’s atnol to offset part of the life subgroup’s post-ace adjustment amti pursuant to sec_1503 b respondent’s alternative methodology respondent’s alternative methodology illustrated in the appendix essentially adopts petitioner’s revised methodology except that it applies the loss limitation rules to preadjustment amti for purposes of both calculating ace and comparing with ace therefore the preadjustment amtis on line sec_3 and are the same the use of consistent amtis results in much higher ace adjustments on line for and even though both petitioner and respondent use the same figures for the sec_56 adjustments on line respondent’s alternative methodology yields the same post- ace_adjustment amtis for and as petitioner’s original calculations c determination of preadjustment amti used to compare with ace under sec_56 petitioner argues that the ace regulations the life-nonlife consolidation regulations and the state farm i rule decision all support the application of the loss limitation rules in computing consolidated preadjustment amti if the loss limitation rules apply in computing consolidated preadjustment amti then as shown on line of petitioner’s revised methodology in the appendix petitioner’ sec_2001 and sec_2002 preadjustment amti would include only the life subgroup’s preadjustment amti the nonlife subgroup’s amti was negative and sec_1 g income_tax regs provides that in calculating the consolidated group’s cti the nonlife subgroup’s taxable_income may not be less than zero respondent argues that if the court decides that a consolidated methodology for calculating the ace_adjustment is appropriate the court may choose to calculate preadjustment amti according to the principles of sec_1 income_tax regs because of the reference to sec_1 income_tax regs in sec_1_56_g_-1 income_tax regs in that case petitioner would be required to add the preadjustment amtis of the subgroups without application of the loss limitation rules sec_1_56_g_-1 income_tax regs defines consolidated pre-adjustment alternative_minimum_taxable_income as starting with the consolidated_taxable_income as defined in sec_1_1502-11 of a consolidated_group for the taxable_year however sec_1_1502-47 income_tax regs provides that sec_1_1502-47 income_tax regs preempts any inconsistent rules in the other consolidated_return_regulations which include sec_1_1502-11 income_tax regs therefore the reference in sec_1_56_g_-1 income_tax regs should be read as a reference to sec_1_1502-47 income_tax regs which defines cti as including only the positive taxable incomes if any of each subgroup and phase income therefore because in and the nonlife subgroup had a negative amti the members of the nonlife subgroup for and would be assigned zero values for their individual preadjustment amtis however the negative amti or atnol of the nonlife subgroup is not lost but is carried back to a prior year used as a current_year offset against consolidated partial licti or carried forward to a future year the court addressed a similar issue in state farm i when the parties disputed the rule computation as discussed above the court held that the starting point for preadjustment amti is the taxable_income of a taxpayer for regular_tax purposes see also sec_55 because life-nonlife consolidated groups calculate their taxable_income for regular_tax purposes under sec_1_1502-47 income_tax regs petitioner was required to calculate its preadjustment amti according to the same principles petitioner argues that the same logic applies in this case because the preadjustment amti used to compare with ace is also based on taxable_income as calculated for regular_tax purposes the legislative_history accompanying the revisions of the amt supports petitioner’s argument it is clarified that in light of the parallel nature of the regular_tax and minimum_tax systems any limitations applying for regular_tax purposes to the use by a consolidated_group of nols or current_year losses eg sec_1503 apply for minimum_tax purposes as well h conf rept vol ii supra at ii-283 c b vol pincite respondent argues that petitioner incorrectly applies the loss limitation rules on line of its revised methodology respondent argues that sec_1_1502-47 income_tax regs applies only after any negative nonlife carrybacks have been petitioner also argues that sec_1_1502-55 proposed income_tax regs fed reg date supports its argument that preadjustment amti to be compared with ace should be calculated by applying the loss limitation rules however because proposed_regulations are accorded little if any deference we decline to address them here see 130_tc_93 101_tc_276 taken into account and setoffs against current_year life subgroup income have been applied respondent argues that sec_56 provides that the atnol deduction is allowed in place of the nol deduction under sec_172 therefore the loss limitation rules apply only after any final atnol for the taxable_year has been determined and after the amount of any carryback of such a loss against the positive taxable_income of the same subgroup has been determined it is evident from petitioner’s briefs and calculation of amti for that petitioner’s revised methodology applies the loss limitation rules after calculating the post-ace adjustment amti of each of the subgroups and determining whether either subgroup had an atnol in the nonlife subgroup had an nol for regular_tax purposes but a positive post-ace adjustment amti because neither subgroup had an atnol petitioner did not apply the loss limitation rules in respondent does not dispute the accuracy of the result of petitioner’s calculations for nor does respondent argue that the discrepancies between petitioner’s and respondent’s calculations for and are caused by mistakes in the order in which petitioner applied the loss limitation rules and calculated the nonlife subgroup’s atnolsdollar_figure furthermore section while respondent disagrees with petitioner’s method of calculating the ace_adjustment and post-ace adjustment amti for continued g -1 a i income_tax regs requires preadjustment amti to be determined without the atnol deduction under sec_56 therefore we do not find that sec_56 prevents taxpayers from respecting the loss limitation rules when calculating preadjustment amti because there is no dispute that under sec_55 the starting point for preadjustment amti is the taxpayer’s taxable_income for regular_tax purposes sec_1 g income_tax regs requires that when calculating cti of a life-nonlife consolidated_group for regular_tax purposes the taxable_income of neither subgroup be less than zero and respondent has not convinced us that petitioner has incorrectly applied the loss limitation rules to preadjustment amti to compare with ace we find that petitioner properly used the preadjustment amtis of both the life and nonlife subgroups to compare with ace in through and properly used the preadjustment amti of only the life subgroup to compare with ace in and continued and it appears that the discrepancies between the parties’ calculations is eliminated if petitioner uses a consistent preadjustment amti d determination of preadjustment amti used to calculate ace under sec_56 while petitioner argues that the loss limitation rules apply when determining preadjustment amti to compare with ace it argues that the loss limitation rules do not apply when calculating ace despite the fact that ace essentially equals preadjustment amti plus the adjustments made under sec_56 see sec_56 petitioner argues that there is no clear guidance as to how a life-nonlife consolidated_group should calculate ace but that sec_1_1502-55 proposed income_tax regs fed reg date supports its position that section provides ii consolidated ace -- a in general -- consolidated ace is determined in accordance with the principles of sec_1_1502-11 taking into account the adjustments and preferences provided in sec_56 sec_57 and sec_58 the consolidated nol deduction and the consolidated sec_247 deduction however are not taken into account in computing consolidated ace b separate ace --in computing consolidated ace each member must compute its separate ace the separate ace of a member is the separate pre-adjustment amti of the member as defined in paragraph b ii of this section adjusted as provided in sec_56 and sec_1_56_g_-1 emphasis added petitioner argues that this section of the proposed_regulations requires that each member calculate its own ace and that each member use its true preadjustment amti even if the member is part of a subgroup that has a negative aggregate preadjustment amti as opposed to treating its amti as zero in such cases as respondent advocates if we accept petitioner’s argument the amti referred to in sec_56 which is used to calculate ace line of petitioner’s revised methodology must be calculated differently from the amti referred to in sec_56 which is used to compare with ace in calculating the ace_adjustment line of petitioner’s revised methodology petitioner believes that this is the correct result because ace is intended to measure true economic_income while amti is intended to measure taxable_income respondent argues simply but persuasively that there is no basis in the code the regulations or any proposed_regulations for applying the loss limitation rules to preadjustment amti when comparing it to ace but not applying the loss limitation rules to preadjustment amti when calculating ace regardless of whether ace is calculated by aggregating the separate ace of each member or otherwise we agree with respondent the general purpose of the ace_adjustment is to tax reported profits that would otherwise be untaxed see h conf rept vol ii supra at ii-272 1986_3_cb_272 and the goal of the amt was to make taxable_income more reflective of economic_income see s rept pincite 1986_3_cb_1 however the general purpose of the ace_adjustment is not sufficient to overcome the plain language of the code and the regulations that treats preadjustment amti as a term with a single meaning as can be seen from the charts illustrating petitioner’s position in the appendix by using different amtis to compare with ace and to calculate ace petitioner is not making its taxable_income reflect its true economic_income for example as petitioner points out on brief the consolidated_group suffered an economic loss of over dollar_figure billion in yet under respondent’s position petitioner has positive amti of about dollar_figure million however even under petitioner’s revised methodology petitioner still has a positive postadjustment amti of almost dollar_figure million petitioner may not avoid this result without completely disregarding the loss limitation rules because the life subgroup had substantial taxable_income in despite the nonlife subgroup’s losses however by using different amtis to compare with ace and to calculate ace petitioner increases its atnol for the nonlife subgroup from dollar_figure billion to over dollar_figure billion despite the fact that the nonlife subgroup’s economic loss was actually only dollar_figure billion petitioner does not argue nor would the record support that either the consolidated_group or the nonlife subgroup alone suffered a dollar_figure billion economic loss in that would justify allowing petitioner such a large atnol petitioner cannot rely upon logic to contradict the plain meaning of sec_56 and its accompanying regulations to achieve an illogical result a similar although less dramatic inflation of the nonlife subgroup’s atnol also occurs in under petitioner’s revised methodology petitioner argues that this inflation is permissible because its method affects only timing not the amount of the total_tax imposed on petitioner’s consolidated_group petitioner believes this to be true because the sec_53 minimum_tax_credit allows a corporation to reduce its current_year regular taxable_income by the amount of an amt paid in prior years however petitioner does not explain how treating the amt as merely a prepayment of regular_tax renders allowing it an nol that is billions of dollars larger than either its regular_tax nol or its economic loss a minor timing issue further we find that the proposed_regulations do not support petitioner’s argument sec_1_1502-55 and ii proposed income_tax regs fed reg date refers to paragraph b for the definition of preadjustment amti for purposes of both comparing to ace to determine the ace_adjustment and calculating consolidated ace paragraph b of the proposed_regulations defines consolidated preadjustment amti as the aggregate of the separate preadjustment amtis of each member just as consolidated ace is defined as the aggregate of the separate aces of each member there is no provision in the proposed_regulations that indicates that life- nonlife consolidated groups should treat the amtis of members of a subgroup with an atnol as zero for purposes of determining consolidated preadjustment amti but then use the actual amtis of members of the same subgroup when calculating consolidated ace petitioner cites no evidence that congress intended that the term preadjustment amti should have a different meaning when used to compare with ace and when used to calculate ace either as a general matter or for life-nonlife subgroups without such evidence we will not be guided by petitioner’s interpretation of the proposed_regulations see 95_tc_525 affd 965_f2d_1038 11th cir petitioner argues that under 286_us_427 it is possible that a single term may have different meanings when used in different circumstances or for different purposes while we agree with this general proposition petitioner has not persuaded the court that in the case of preadjustment amti there is such variation in the connection in which the words are used as reasonably to warrant the conclusion that they were employed in different parts of the act with different intent id to the contrary sec_1_56_g_-1 and ii income_tax regs provides that the following definitions of consolidated preadjustment amti and consolidated ace apply to consolidated groups and suggests a single definition definitions -- i consolidated pre-adjustment alternative_minimum_taxable_income --consolidated pre- adjustment alternative_minimum_taxable_income is the consolidated_taxable_income as defined in section of a consolidated_group for the taxable_year determined with the adjustments provided in sec_56 and sec_58 except for the adjustment for adjusted_current_earnings and the alternative_tax net_operating_loss determined under sec_56 and increased by the preference items described in sec_57 ii consolidated adjusted_current_earnings --the consolidated adjusted_current_earnings of a consolidated_group is the consolidated pre-adjustment alternative_minimum_taxable_income of the consolidated_group for the taxable_year adjusted as provided in sec_56 and this section emphasis added given the proximity of these two definitions in the regulations it would strain all reason if the reference to preadjustment amti in the definition of consolidated ace were not to the definition of preadjustment amti in the paragraph above it finally petitioner argues that when the commissioner fails to issue clear and unambiguous regulations from which a taxpayer can ascertain the prescribed method for calculating its tax_liability the taxpayer may make the computation using any reasonable method it selects see 177_f3d_136 3d cir affg 109_tc_100 gottesman co v commissioner t c pincite- however as discussed above we do not find petitioner’s calculation to be reasonable petitioner alternatively argues that if the court determines that the loss limitation rules must be respected when calculating ace then if a subgroup has a negative ace it should be excluded from the current_year ace computation and carried back to offset any positive ace of that subgroup in prior years however there is no provision in the code or the regulations for either excluding or carrying back negative aces the loss limitation rules apply to taxable_income not ace therefore the loss limitation rules apply to the determination of preadjustment amti when calculating ace but they do not exclude negative aces as illustrated by respondent’s alternative methodology because consolidated ace is allocated between the subgroups when determining atnols of the subgroups no negative ace will be lost as petitioner contends because we accept petitioner’s argument that the loss limitation rules apply to consolidated preadjustment amti as defined in sec_1_56_g_-1 income_tax regs line of petitioner’s revised methodology petitioner must also apply the loss limitation rules to the amti referenced when calculating consolidated ace defined in sec_1_56_g_-1 income_tax regs line of petitioner’s revised methodology v conclusion we hold that petitioner must calculate its ace and ace_adjustment on a consolidated basis for its entire consolidated_group however petitioner must use a consistent preadjustment amti that applies the loss limitation rules when calculating its ace ace_adjustment and post-ace adjustment amti we have considered all of the arguments made by the parties to the extent not discussed herein we find them to be moot or without sufficient merit to alter our decisions based on the foregoing be issued an appropriate order will appendix the figures in this appendix are for illustrative purposes only the parties agree that after all the issues in the instant case have been resolved computations in accordance with rule will be necessary petitioner’s original calculations for nonlife subgroup life subgroup consolidated calculation of preadjustment amti regular taxable_income loss before nol deduction adjustments and preference sec_3 preadjustment amti to compare with ace preadjustment amti to calculate ace sec_56 adjustments dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number calculation of ace big_number big_number big_number big_number big_number big_number ace line sec_4 big_number big_number big_number calculation of amti big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number excess of ace over preadjustment amti line - line of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 petitioner’s original calculations for nonlife subgroup life subgroup consolidated calculation of preadjustment amti regular taxable_income loss before nol deduction adjustments and preference sec_3 preadjustment amti to compare with ace preadjustment amti to calculate ace sec_56 adjustments dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number calculation of ace big_number big_number big_number big_number big_number big_number ace line sec_4 big_number big_number big_number excess of ace over preadjustment amti lines - of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 sec_1503 offset amti after offset calculation of amti big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number --- --- --- --- --- --- petitioner’s revised methodology for nonlife subgroup life subgroup consolidated calculation of preadjustment amti regular taxable_income loss before nol deduction adjustments and preference sec_3 preadjustment amti to compare with ace preadjustment amti to calculate ace sec_56 adjustments dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number calculation of ace big_number big_number big_number big_number ace line sec_4 big_number big_number calculation of amti excess of ace over preadjustment amti line - line of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 --- --- --- --- big_number big_number big_number big_number big_number big_number big_number big_number petitioner’s revised methodology for nonlife subgroup life subgroup consolidated calculation of pre-adjustment amti regular taxable_income loss before nol deduction adjustments and preference sec_3 preadjustment amti to compare with ace preadjustment amti to calculate ace sec_56 adjustments dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number calculation of ace big_number big_number big_number big_number ace line sec_4 big_number big_number calculation of amti excess of ace over preadjustment amti line - line of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 sec_1503 offset amti after offset --- --- --- --- big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number respondent’s position petitioner’s methodology using consistent preadjustment amti for nonlife subgroup life subgroup consolidated calculation of pre-adjustment amti regular taxable_income loss before nol deduction adjustments and preferences dollar_figure dollar_figure dollar_figure big_number big_number big_number preadjustment amti big_number big_number big_number calculation of ace preadjustment amti sec_56 adjustments ace line sec_4 --- --- --- excess of ace over preadjustment amti line - line of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 consolidated atnol deduction amti before limiting use of current_year amt loss lines --- --- --- --- --- calculation of amti --- --- big_number big_number big_number big_number --- big_number --- --- big_number big_number big_number big_number big_number big_number big_number --- calculation of limitation on use of current_year amt loss current_year amt loss subject_to limitation big_number --- big_number --- --- --- --- --- consolidated atnol carryback to available current_year amt loss lines - portion of available current_year amt loss taken into account the lesser_of of zero and of dollar_figure calculation of amti after limiting use of current_year amt loss consolidated amti loss after limitation per subgroup consolidated amti --- big_number big_number respondent’s position petitioner’s methodology using consistent preadjustment amti for nonlife subgroup life subgroup consolidated calculation of pre-adjustment amti regular taxable_income loss before nol deduction adjustments and preferences dollar_figure dollar_figure dollar_figure big_number big_number big_number preadjustment amti big_number big_number big_number calculation of ace preadjustment amti sec_56 adjustments ace line sec_4 --- --- --- excess of ace over preadjustment amti line - line of excess ace_adjustment amti before alternative_tax nol deduction line sec_3 consolidated alternative_tax nol deduction amti before limiting use of current_year amt loss lines --- --- --- --- --- calculation of amti --- --- big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number --- --- --- big_number big_number big_number calculation of limitation on use of current_year amt loss current_year amt loss subject_to limitation big_number --- big_number --- --- --- --- --- --- big_number consolidated alternative_tax nol_carryback to available current_year amt loss lines - portion of available current_year amt loss taken into account lesser_of of zero or of dollar_figure consolidated amti loss after limitation per subgroup consolidated amti big_number