t c memo united_states tax_court duquesne light holdings inc subsidiaries f k a dqe inc subsidiaries petitioner v commissioner of internal revenue respondent docket no filed date miriam l fisher and gary b wilcox for petitioner joseph p grant and donna p leone for respondent memorandum opinion chiechi judge this case is before the court on petitioner’s motion for partial summary_judgment petitioner’s motion and respondent’s cross-motion for partial summary_judgment respondent’s motion the court will deny petitioner’s motion as set forth below the court will grant respondent’s motion as set forth below background the record establishes the parties agree and or the parties do not dispute the following petitioner duquesne light holdings inc duquesne or petitioner is a pennsylvania corporation with its principal_place_of_business in pittsburgh pennsylvania petitioner by and through its subsidiaries was in the business of distributing electrical energy to customers throughout certain regions of pennsyl- vania duquesne was the common parent of a consolidated_group of corporations duquesne consolidated_return group that filed a consolidated federal_income_tax tax_return consolidated_return for each of all relevant years aquasource inc aquasource an indirect wholly owned subsidiary of duquesne and a member of the duquesne consolidated_return group was organ- ized under the laws of the state of delaware for the purpose of acquiring small and mid-size water wastewater and water services companies pursuant to its unless otherwise indicated the following discussion pertains to all relevant times business plan around date aquasource began acquiring certain water and wastewater companies that it held in certain of its subsidiaries during each of the years and aquasource and certain of its subsidiaries continued to make significant acquisitions of certain water and wastewater companies in after having made four acquisitions of certain water and wastewater compa- nies during that year aquasource ceased making such acquisitions in duquesne began making investments in aquasource in an effort to diversify duquesne’s business during that year dqenergy partners inc a subsidiary of duquesne contributed to aquasource dollar_figure in cash and big_number shares of duquesne preferred_stock in exchange for shares of aquasource class a common_stock class a stock during duquesne directly or indirectly through dqenergy partners inc contributed to aquasource dollar_figure in cash and big_number shares of duquesne preferred_stock aquasource did not issue to duquesne any additional shares of aquasource class a common_stock with respect to those capital contri- butions aquasource issued a number of shares of class b stock to certain employees and other individuals that class of stock is not involved in the issues presented in the parties’ respective motions on date dqenergy partners inc distributed it sec_12 shares of aquasource class a stock to duquesne thereby terminating dqenergy partners inc ’s interest in aquasource and making duquesne the direct owner of that stock during the period date to date duquesne contrib- uted to aquasource a total of dollar_figure in cash on date aquasource issued an additional big_number shares of class a stock to duquesne thereby increasing the total number of outstanding shares of aquasource class a stock that duquesne owned from shares to big_number shares duquesne calcu- lated its basis in the big_number shares of aquasource class a stock that it owned as of date including the shares of aquasource class a stock that it had acquired through dqenergy partners inc as equal to the total amount ie dollar_figure of the cash contributions that it made to aquasource during the period date to date on date duquesne contributed to aquasource dollar_figure in cash on date aquasource issued big_number shares of its class a stock to duquesne thereby increasing the total number of outstanding shares of aquasource class a stock that duquesne owned from big_number shares to million as discussed below it was not until date that aquasource issued any additional shares of its class a stock shares duquesne calculated its basis in the big_number shares of aquasource class a stock issued to it on date as equal to the amount of the cash contribution ie dollar_figure that it made to aquasource on date excluding the cash contribution of dollar_figure that duquesne made on date during the period february to date duquesne contributed to aquasource a total of dollar_figure in cash on date aquasource issued big_number shares of its class a stock to duquesne thereby increasing the total number of outstanding shares of aquasource class a stock that duquesne owned from million shares to big_number shares duquesne calculated its basis in the big_number shares of aquasource class a common_stock issued to it on date as equal to the total amount excluding the cash contribution of dollar_figure that it made to aquasource on date of the cash contributions ie dollar_figure that it made to aquasource during the period date to date duquesne filed an annual report for in which it announced that it would be conducting a comprehensive market-based strategic and financial review on the basis of that review duquesne decided to refocus its business on electrical energy and divest its interests in other types of energy as a result duquesne decided to begin selling various assets of aquasource on date duquesne transferred to lehman brothers hold- ings inc lehman the big_number shares of aquasource class a stock that it owned as of date stock transfer in exchange for an amount equal to dollar_figure million that was payable in certain services which lehman had already pro- vided and was to provide to duquesne on or before date duquesne claimed a capital_loss of dollar_figure on that transfer of aquasource stock which it calculated under sec_1001 as equal to the excess of its claimed adjusted_basis in that stock over the claimed amount_realized duquesne deducted that claimed capital_loss under sec_165 in the consolidated_return that it filed for the duquesne consolidated_return group for taxable_year after certain adjustments that respondent made and that petitioner does not dispute petitioner’s in aquasource sold one of its assets ie one of its subsidiaries and claimed a capital_loss of dollar_figure as a result of that sale that loss is not in question in this case all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure sec_165 allows a deduction for any loss sustained during the taxable_year claimed capital_loss deduction of dollar_figure was reduced to dollar_figure stock loss in question on date petitioner filed form_1139 corporate application_for tentative refund form in which it carried back from taxable_year dollar_figure to taxable_year dollar_figure of which was attributable to the stock loss in question pursuant to sec_6411 respondent paid petitioner a tentative refund of dollar_figure with respect to form_1139 that it had filed during and duquesne contributed to aquasource a total of dollar_figure in cash aquasource did not issue to duquesne any additional shares of aquasource class a stock with respect to those capital contributions duquesne made no capital contributions to aquasource after in aquasource sold three of its direct and two of its indirect subsid- iaries duquesne deducted under sec_165 claimed capital losses of dollar_figure asset losses in question with respect to those respective sales in the consolidated_return that it filed for the duquesne consolidated_return group for taxable_year petitioner carried back dollar_figure and dollar_figure of the stock loss in question to each of taxable years and respectively on date petitioner filed form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year dollar_figure of which was attributable to the asset losses in question pursuant to sec_6411 respondent paid petitioner a tentative refund of dollar_figure with respect to form_1139 that it had filed in an annual report for duquesne described aquasource as a discon- tinued operation that report stated in pertinent part pursuant to agreements entered into in to sell the majority of our investment in aquasource as well as our commitment to sell the remaining net assets of aquasource th is subsidiar y ha s been reflected as a discontinued operation in the consolidated financial statements prior year financial statements have been reclassified to conform to the discontinued operations presentation on date we duquesne entered into an agreement to sell aquasource’s investor-owned water utilities to psc philadelphia suburban corporation for approximately dollar_figure million in cash in addition psc is acquiring selected operating and maintenance con- tract operations in seven states that are closely integrated with the investor-owned water utilities being acquired the businesses being acquired represent a significant portion of aquasource’s remaining assets the final purchase_price could vary from dollar_figure to dollar_figure mil- lion as various purchase_price adjustments are applied the closing is expected to occur during the second half of in aquasource sold all of its remaining assets to unrelated third parties petitioner deducted under sec_165 a claimed capital_loss totaling dollar_figure with respect to those sales in the consolidated_return that it filed for the duquesne consolidated_return group for taxable_year after certain adjustments that respondent made and that petitioner does not dispute the claimed capital_loss deduction of dollar_figure was increased to dollar_figure asset losses in question on date petitioner filed form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year thereafter on date petitioner filed a second form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year thus a total of dollar_figure of long-term_capital_losses was carried back from taxable_year to taxable_year dollar_figure of which was attributable to the asset losses in question pursuant to sec_6411 respondent paid petitioner tentative refunds totaling dollar_figure with respect to the two forms that it had filed the period of limitations under sec_6501 as extended in writing under sec_6501 during which respondent may assess and collect tax for taxable_year expired on date the period of limitations under sec_6501 as extended in writing under sec_6501 during which respondent may assess and collect tax for taxable_year also expired on date the period of limitations under sec_6501 as extended in writing under sec_6501 during which respondent may assess and collect tax for taxable_year would have expired on date but is suspended under sec_6503 until days after the decision in the instant case becomes final on date respondent sent to petitioner a so-called 30-day_letter with respect to the duquesne consolidated_return group’s taxable years and respondent attached to that 30-day_letter a copy of an examination_report respondent’s examination_report that one of respondent’s revenue agents revenue_agent had prepared as a result of that agent’s examina- tion of those taxable years the court will sometimes refer collectively to the day letter and respondent’s examination_report attached thereto as the 30-day_letter in respondent’s examination_report the revenue_agent asserted in summary between and duquesne contributed capital of dollar_figure to aquasource there were operating profits in four years dollar_figure in dollar_figure in dollar_figure in and dollar_figure in or total operating profits of dollar_figure there were operating losses in five years dollar_figure in dollar_figure in dollar_figure in dollar_figure in and dollar_figure in or total operating losses of dollar_figure in addition to the operating losses capital losses after adjustment were claimed on the sale of aquasource stock to lehman dollar_figure as well as on the sale of the assets of aquasource dollar_figure in dollar_figure in and dollar_figure in accordingly capital losses of dollar_figure were claimed in connection with duquesne’s investment in aquasource the revenue_agent proposed the following determinations in respondent’s examination_report when the capital contributed and profits and losses operating and capital are viewed in light of the capital that was returned to duquesne when it shed itself of the water business it is clear that the tax losses claimed in connection with this investment were exces- sive in that they greatly exceed the true economic loss incurred by duquesne since the consolidated_group recognized a loss on the date disposition of approximately of the aquasource stock which loss was attributable to the fact that there was built-in_loss in the underlying assets of aquasource the consolidated_group is not permitted to take the duplicative losses when the underlying assets were sold in and accordingly the portion of the asset sale losses that are duplicative determined by application of a ratio consisting of the loss claimed on the stock sale over the potential duplicative loss as of date against the losses claimed per asset sale should be disallowed by application of the doctrine_of 292_us_62 t here is a possibility of a duplicated_loss anytime stock in the subsidiary is disposed of prior to disposition of the assets held by the subsidiary and the assets have built-in_loss this is because the value of the stock in the subsidiary is based upon the value of the underly- ing assets if the stock is sold generating a loss and then the assets with built-in_loss are sold generating another loss then the consoli- dated group gets a double deduction for what is one economic loss on date petitioner’s representative filed a protest on peti- tioner’s behalf with respondent’s appeals_office appeals_office in which petitioner protested the proposed determinations in the 30-day_letter petitioner did not reach a settlement agreement with the appeals_office with respect to those proposed determinations petitioner’s representative sent to the appeals_office on petitioner’s behalf a letter dated date date letter in which petitioner questioned the reasoning behind certain of respondent’s proposed determinations with respect to its tax_liability in response to petitioner’s date letter counsel for respondent sent to petitioner’s representative a letter dated date in that letter that counsel stated duquesne claimed refunds via forms for the year by carrying the capital losses from and back to that year on separate forms for each year upon examination the service did not disallow the or losses but did disallow the losses exam also proposed in the alternative to adjust dlh duquesne ’s year to force dlh to recognize its excess_loss_account ela which was largely attributable to the dollar_figure duplicated_loss the matter was not settled in appeals so that the proposed snd statutory_notice_of_deficiency reflected the disallow- ance of the loss and the ela adjustment for in the course of its review of the asset loss disallowance it was necessary for counsel to review the facts of the original loss since those facts were relevant to the application of the ilfeld doctrine under which the loss carryback had been disallowed counsel determined that under a number of legal and factual theo- ries the stock loss in question was not allowable counsel recommended disallowance of the carryback of the loss as an alternative ground in support of the adjustment for the year ie as an offset to dlh’s refund claim for the year counsel also recommended that asset losses in question claimed with respect to as aquasource asset sales also carried back to the year via a form_1139 refund claim be disallowed under the ilfeld doctrine see 292_us_62 the ilfeld doctrine where applicable precludes multiple recognition of the same economic loss the application of the doctrine is on a facts and circumstances basis on date respondent issued to petitioner a notice_of_deficiency notice for taxable years and in that notice respondent determined a deficiency of dollar_figure for taxable_year in that notice respondent further determined for alternative reasons to disallow the carryback to taxable_year of a total of dollar_figure of claimed long-term_capital_losses respondent set forth in the notice the following principal reasons for those determinations item 7d--long term capital_loss carryback--2000 it has been determined that the capital_loss in the amount of dollar_figure claimed in connection with duquesne light holdings inc subsidiaries’ dlh’s transfer of shares of aquasource to lehman brothers lehman in and carried back to the years and in the amounts of dollar_figure dollar_figure and dollar_figure respectively is disallowed for the alternative reasons explained below the disallowance of amounts carried back from to and has the effect of reallocating capital_loss carrybacks from to and which in turn results in a decreased capital_loss_carryback from to the net effect of the capital_loss carry- back disallowance and reallocation is to increase capital_gain for the year by dollar_figure as shown in pages and the transfer of aquasource stock to lehman was made in order to increase the value of dlh’s remaining aquasource stock and consti- tutes a capital_expenditure under sec_263 therefore no loss was incurred under sec_165 the cost_basis of the transferred stock in excess of the amount considered received for the transferred stock must be allocated to the remaining aquasource stock held by dlh the transfer of aquasource stock to lehman was property transferred in consideration of services provided to aquasource consequently pursuant to sec_1_83-6 and sec_1 the transfer of stock is considered to be a contribution of stock by dlh to aquasource followed by the transfer of the stock by aquasource to lehman the substance of the transaction was to compensate lehman for its service to aquasource with stock representing a interest in aquasource the form of the transaction involved interrelated steps purportedly producing a disproportionate capital_loss which may not be considered independently of that overall transaction in addition the transaction lacked economic_substance the issuances of stock by aquasource to dlh on date and date the new shares were not made in connection with capital contributions but rather were stock divi- dends pursuant to sec_307 dlh’s basis in its shares of aquasource stock is allocated pro-rata among the old and new shares consequently if it is determined that a loss is allowable in connection with the transfer of aquasource shares to lehman then the amount of that loss is computed a sec_4 big_number big_number of dlh’s basis in all of its aquasource stock less the amount considered received by dlh for the stock pursuant to sec_83 respondent set forth in the notice under the heading long term capital_loss carryback--2000 the following alternative reason respondent’s alternative determinations for disallowing the carryback to taxable_year of a total of dollar_figure of claimed long-term_capital_losses alternatively if loss recognition in connection with the transfer of aquasource stock to lehman is allowed losses claimed in connection with the sale of aquasource assets asset losses in and are disallowed as those losses duplicate the economic loss claimed in connection with the transfer of aquasource stock consequently losses claimed in and in the amounts of dollar_figure and dollar_figure respectively and carried back to the year are disallowed respondent did not explain in the notice the methodology that respondent used to determine to disallow the respective deductions for taxable_year sec_2002 and and the respective carrybacks to taxable_year from taxable_year of only dollar_figure of the dollar_figure of asset losses in question and from taxable_year of only dollar_figure of the dollar_figure of continued respondent also made the following determination in the notice to include in petitioner’s income for taxable_year the excess_loss_account of aquasource totaling dollar_figure excess_loss_account determination item 7e--excess loss account--2005 it is determined that the excess_loss_account in aquasource in the amount of dollar_figure is includable in income in please note however that some of the other adjustments determined herein if sustained or agreed would have the effect of reducing the excess_loss_account and in turn would reduce the amount of this adjustment while the court was considering the various issues presented in petitioner’s motion and the only issue presented in respondent’s motion including the issues presented in those motions relating to respondent’s alternative determinations the court was considering an issue duplicate deductions issue in another case thrifty oil co v commissioner docket no that involved what the commissioner of internal revenue commissioner alleged were certain deduc- tions that the taxpayer claimed for different taxable years and that represented the same economic losses of the taxpayer duplicate or double deductions the commissioner was arguing in thrifty oil co that 292_us_62 controlled the resolution of that issue respondent advances continued asset losses in question respondent did however explain that methodology in the 30-day_letter the same argument in the instant case with respect to certain deductions that petitioner claimed for different taxable years and that respondent alleges represent the same economic losses of petitioner in recognition of the potential precedential effect of the resolution of the duplicate deductions issue in thrifty oil co on the resolution of the duplicate deductions issue in the instant case duquesne filed a motion for leave to file a brief amicus curiae in the thrifty oil co case duquesne’s amicus brief which the court granted in that motion duquesne described the duplicate deductions issue presented in thrifty oil co which involved taxpayers who must comply with the consolidated_return_regulations as the same as the duplicate deduc- tions issue presented in the instant case which also involves taxpayers who must comply with the consolidated_return_regulations the court filed its opinion in 139_tc_198 and as discussed in detail below concluded that under the court’s caselaw and caselaw of the u s court_of_appeals for the ninth circuit_court of appeals for the ninth circuit the court to which an appeal in thrifty oil co would normally lie charles ilfeld co controlled resolution of the duplicate deductions issue presented in thrifty oil co the court held there that the taxpayer was not entitled to certain deductions for the taxable years at issue that represented or duplicated deductions for the same economic losses that the taxpayer had previously taken for certain other taxable years on the same date on which the court issued its opinion in thrifty oil co the court issued an order in the instant case in that order the court ordered the parties to file respective responses to that order explaining why thrifty oil co should or should not control resolution of the duplicate deductions issue presented in petitioner’s motion and respondent’s motion petitioner and respondent filed their respective responses petitioner’s response to the court’s order and respon- dent’s response to the court’s order respectively discussion the court may grant summary_judgment where there is no genuine dispute of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine dispute of material fact and factual inferences will be read in a manner most favorable to the nonmoving party see 85_tc_812 79_tc_340 in petitioner’s motion petitioner requests the court to grant summary adjudication in its favor on several issues petitioner initially asks the court for summary adjudication in its favor with respect to the duplicate deductions issue raised in respondent’s alternative determinations that petitioner is not entitled to deduct for taxable_year and carry back to taxable_year dollar_figure of the dollar_figure of asset losses in question in support of that request petitioner argues that neither 292_us_62 nor 139_tc_198 which relied on charles ilfeld co and caselaw of the court_of_appeals for the ninth circuit controls resolution of respondent’s alternative determinations according to petitioner the result sought by respondent in respondent’s alternative determi- nations could only be obtained by issuing regulations in respondent’s motion respondent asks the court to grant summary adjudication in respondent’s favor with respect to the duplicate deductions issue raised in respondent’s alternative determinations that petitioner is not entitled to deduct for and respectively and carry back to taxable_year dollar_figure of the dollar_figure of asset losses in question and dollar_figure petitioner does not address in detail in petitioner’s motion respondent’s alternative determinations that petitioner is not entitled to deduct for taxable_year and carry back to taxable_year dollar_figure of the dollar_figure of asset losses in question although petitioner does not address those alternative determinations the court does of the dollar_figure of asset losses in question in support of that request respondent argues that both charles ilfeld co and thrifty oil co which relied on charles ilfeld co control resolution of respondent’s alternative determi- nations according to respondent ilfeld continued to be a vital canon of statutory construction in tax law generally and more specifically the 85_tc_274 line of cases established that the ilfeld doctrine continues to be a vital canon of statutory construction in the consolidated_return area--even well after the implementation of former sec_1_1502-32 income_tax regs which in fact would have prevented any duplication of loss under the specific facts of ilfeld the court will sometimes refer to the duplicate deductions issue raised in respon- dent’s alternative determinations and presented in both petitioner’s motion and respondent’s motion as the ilfeld issue in the event the court were to sustain respondent’s alternative determina- tions petitioner asks the court in petitioner’s motion to conclude that under sec_6501 respondent is not permitted to assess and collect a deficiency respondent represents in certain filings that respondent made with respect to the parties’ respective motions that if the court were to grant respondent’s motion and sustain the disallowance of the respective deductions for taxable_year sec_2002 and and the respective carrybacks to taxable_year of a total of dollar_figure of the asset losses in question and the asset losses in question respondent would concede the determinations in the notice relating to the stock loss in question and the excess_loss_account determination for taxable_year 2000--a year with respect to which the parties agree the period of limitations under sec_6501 and c a has expired--that is attributable to the carryback to that year from taxable_year 2002--a year with respect to which the parties agree the period of limitations under sec_6501 and c a has expired--of dollar_figure of the dollar_figure of asset losses in question the court will refer to the issue relating to sec_6501 presented in petitioner’s motion as the statute_of_limitations issue ilfeld issue in charles ilfeld co the supreme court of the united_states supreme court considered whether the taxpayer the parent of a group of companies that filed consolidated_returns was entitled to deduct for the taxable_year at issue certain losses that had arisen in connection with the dissolution of two of its subsidiaries where from an economic standpoint the taxpayer as the parent of that consolidated_group had deducted those same losses as operating losses of those subsidiaries for certain taxable years that preceded the taxable_year at issue the supreme court held that the taxpayer was not entitled to those claimed petitioner asks the court in petitioner’s motion to grant summary adjudication in its favor on several other issues the court’s holdings herein and certain concessions of respondent see supra note have made those other issues moot and the court will not consider them and will deny petitioner’s motion with respect to them deductions for the taxable_year at issue the supreme court gave the following reasons for so holding the allowance claimed by the taxpayer would permit the taxpayer twice to use the taxpayer’s subsidiaries’ losses for the reduction of its taxable_income by means of the consolidated_returns in earlier years it was enabled to deduct them and now it claims for deductions for diminution of assets resulting from the same losses if allowed this would be the practical equivalent of double deduction in the absence of a provision of the revenue act of definitely requiring it a purpose so opposed to precedent and equality of treatment of taxpayers will not be attributed to lawmakers there is nothing in the revenue act of that pur- ports to authorize double deduction of losses or in the regulations to suggest that the commissioner construed any of its provisions to empower him to prescribe a regulation that would permit consoli- dated returns to be made on the basis now claimed by the taxpayer charles ilfeld co v hernandez u s pincite in thrifty oil co the court considered whether the taxpayer the parent of a group of corporations that filed consolidated_returns thrifty consolidated_return group was entitled to deductions for the taxable years at issue for certain envi- ronmental remediation expenses if as the commissioner claimed those deduc- tions from an economic standpoint duplicated deductions for certain capital losses that the taxpayer had taken for taxable years which were not before the court and with respect to which the respective periods of limitations under sec_6501 had expired thrifty oil co v commissioner t c pincite the court found that the environmental remediation expense deductions at issue in thrifty oil co and the capital_loss deductions in question represented the same economic loss id pincite the court held that under charles ilfeld co and caselaw of the court_of_appeals for the ninth circuit the taxpayer was not entitled for the taxable years at issue to deductions for certain environmental remediation expenses id pincite because it will be helpful in understanding the import of both charles ilfeld co and thrifty oil co to the court’s resolution of the parties’ dispute in the instant case with respect to the ilfeld issue raised in respondent’s alternative determinations the court will describe in detail the facts and the analyses in thrifty oil co on which the court based that finding and that holding in thrifty oil co the taxpayer through one of its subsidiaries acquired certain property on which an oil refinery was located refinery property thrifty oil co v commissioner t c pincite because of certain refinery operations that property suffered certain environmental contamination and the taxpayer and the subsidiary were responsible for remediation of the refinery property id as of date the contingent environmental remediation liabilities with respect to the refinery property totaled dollar_figure id pincite in pursuant to a so-called environmental remediation strategy one of the taxpayer’s subsidiaries sold certain stock and claimed a capital_loss of dollar_figure capital_loss with respect to that sale in the thrifty consolidated_return group return that the taxpayer filed for taxable_year ended date id pincite the taxpayer deducted approximately dollar_figure million of that capital_loss for that taxable_year and carried forward the remainder of that loss to and claimed capital_loss deductions of dollar_figure dollar_figure and dollar_figure for the following three taxable years taxable years ended date and respectively id n thereafter the taxpayer claimed deductions for the remaining dollar_figure of the capital_loss for taxable years ended date and id pincite during and certain years thereafter another of the taxpayer’s subsid- iaries made certain expenditures_for the remediation of the refinery property environmental remediation expenses id the taxpayer provided the funds used to pay those expenses id the taxpayer claimed deductions of dollar_figure in date the owner of the refinery property entered into a sec_351 transaction with another of thrifty’s subsidiaries 139_tc_198 in exchange for shares of the latter subsidiary’s stock the owner of the refinery property transferred to that subsidiary a promissory note with a face value and claimed fair_market_value of dollar_figure id in addition that latter subsidiary assumed the contingent environmental remediation liabilities of dollar_figure relating to the refinery property id pincite the subsidiary claimed a basis in the acquired shares equal to the face value of the promissory note without adjusting for the assumed contingent environmental remediation liabilities id dollar_figure and dollar_figure for taxable years ended date and respectively for its payment of certain environmental remediation expenses thrifty oil co v commissioner t c pincite thereafter the taxpayer claimed deductions of dollar_figure dollar_figure and dollar_figure for taxable years ended date and respectively for its payment of certain environmental remediation expenses id pincite in a notice_of_deficiency thrifty oil notice the commissioner determined to disallow capital_loss_carryover deductions of dollar_figure and dollar_figure for taxable years ended date and respectively and environmen- tal remediation expense deductions of dollar_figure dollar_figure and dollar_figure for taxable years ended date and id in support of those determinations the commissioner further determined that those capital_loss_carryover deductions and those environmental remediation expense deductions duplicate tax benefits already claimed for a single economic loss id after certain stipulations and certain concessions the sole issue before the court in thrifty oil co was whether the taxpayer was entitled to the environmen- the respective periods of limitations under sec_6501 had not expired for taxable years ended date and at the time the commissioner issued the thrifty oil notice the respective periods of limitations under sec_6501 for taxable years ended date and had expired at that time thrifty oil co v commissioner t c pincite tal remediation expense deductions that it claimed for taxable years ended date and id pincite the commissioner’s only argument in support of his position that the taxpayer was not entitled to those claimed deductions was that they duplicate dollar_figure in capital_loss deduc- tions the taxpayer claimed for years not before the court and hence the taxpayer is not entitled to up to dollar_figure of the claimed environmental remediation expense deductions id pincite after examining caselaw of this court and the court_of_appeals for the ninth circuit this court concluded that t he court_of_appeals for the ninth circuit like the tax_court follows the ilfeld doctrine id pincite emphasis added it is significant for purposes of the instant case that the court came to that conclusion in thrifty oil co after having examined several of the cases eg 85_tc_274 89_tc_207 103_tc_398 aff’d 62_f3d_136 5th cir on which duquesne relies as petitioner in the instant case and relied as amicus in thrifty oil co to support its position that the court does not follow the interpre- tation of charles ilfeld co that respondent advances in the instant case and advanced in thrifty oil co in thrifty oil co the court analyzed those cases in order to explain how the court previously has applied the supreme court’s pronouncement of the ilfeld doctrine thrifty oil co v commissioner t c pincite the court concluded on the basis of that analysis that i f the deductions represent the same economic loss to petitioner and petitioner cannot point to a specific provision demonstrating congress’ intent to allow the double deductions then the claimed environmental remediation expense deductions must be disal- lowed id pincite in an attempt to avoid the application of the holding in charles ilfeld co to the duplicate deductions issue in thrifty oil co the taxpayer argued in thrifty oil co that the capital_loss deductions that it claimed for taxable years before the taxable years at issue and the environmental remediation expense deductions that it claimed for the years at issue did not represent the same economic loss no double deduction argument and that it could point to a specific provision ie sec_162 demonstrating the intention of congress to allow the double deduc- tions specific provision argument see id pincite the court rejected both of those arguments see id in rejecting the taxpayer’s no double deduction argument in thrifty oil co the court found both the capital_loss and the environmental remediation expense deductions represent costs associated with the cleanup of the refinery property the capital_loss represents the unpaid liability and the environmental remediation expense deductions represent the actual cost when paid this--deducting the unpaid liability in the form of a capital_loss and then deducting it again when paid--is the core problem of this case id pincite in rejecting the taxpayer’s specific provision argument in thrifty oil co the court concluded that sec_162 is a general allowance provision which does not reflect a ‘clear declaration of intent’ to allow a double deduction id pincite quoting 62_tc_878 in petitioner’s response to the court’s order in the instant case ordering the parties to file respective responses to that order in which they were to explain why thrifty oil co should or should not control resolution of the ilfeld issue presented in the petitioner’s motion and respondent’s motion petitioner maintains that thrifty oil co should not control the outcome of the instant case because in thrifty oil co the court followed certain caselaw of the court_of_appeals for the ninth circuit including 354_f2d_997 9th cir aff’g 38_tc_633 that interpreted and applied charles ilfeld co in a certain way and the u s court_of_appeals for the third circuit_court of appeals for the third circuit the court to which an appeal in the instant case would normally lie has interpreted and applied charles ilfeld co in a manner that is different from the way in which the court_of_appeals for the ninth circuit has interpreted and applied that case the court turns first to petitioner’s argument about marwais steel co according to petitioner in marwais the ninth circuit interpreted what it conceded was dicta in ilfeld as an overriding principle that takes precedence over the plain meaning of the code marwais f 2d pincite interpret- ing marwais thrifty oil stated that the so-called ilfeld doctrine prevents a double tax_benefit unless the words of a specific provision show congressional intent to allow the double benefit slip op pincite in using ilfeld to override the plain meaning of sec_162 without examining either the law’s intent or the intent of the legislative regulations governing consolidated groups thrifty oil is firmly aligned with ninth circuit precedent as such thrifty oil should not govern the outcome of this case rather petitioner should prevail under the third circuit’s approach the ninth circuit recognized that part of what was there said in ilfeld was dicta but stated that it is dicta the court will follow in cases having any similarity at all on double deductions for a single economic loss marwais f 2d pincite petitioner misconstrues both what the court_of_appeals for the ninth circuit said in marwais steel co with respect to the application of charles ilfeld co in that court and what this court said in thrifty oil co about the import of what that court_of_appeals said on this court’s resolution of the duplicate deductions issue presented in thrifty oil co in marwais steel co the court_of_appeals for the ninth circuit stated we conclude as the tax_court did plausible as the position of marwais is there is a message in ilfeld co another double tax deduction disallowed we follow taxpayer’s argument that part of what was there said was dicta if what it said there was dicta we believe that it is dicta the court will follow in cases having any simi- larity at all on double deductions for a single economic loss fn ref omitted marwais steel co v commissioner f 2d pincite in thrifty oil co the court construed the above-quoted excerpt from marwais as meaning just what it says and nothing more the court_of_appeals for the ninth circuit like the tax_court follows the ilfeld doctrine thrifty oil co v commissioner t c pincite contrary to petitioner’s argument the court_of_appeals for the ninth circuit said nothing more about charles ilfeld co that influenced the court’s resolution of the duplicate deductions issue in thrifty oil codollar_figure in thrifty oil co v commissioner t c pincite n the court addressed the following argument in duquesne’s amicus brief ‘the first circuit_court of appeals reached the opposite conclusion on facts very similar to marwais ’ see 561_f2d_1023 1st cir the court gave the following response to that argument even if true this case thrifty oil co is not appealable in the first circuit we also note textron dealt with a parent and a subsidiary that did not file a consolidated_return a point which was carefully noted by the court in textron thrifty oil co files continued the court turns now to petitioner’s argument that charles ilfeld co should not apply in the instant case because according to petitioner the court_of_appeals for the third circuit does not follow the marwais approach of the court_of_appeals for the ninth circuit in interpreting and applying that supreme court case in support of that argument petitioner relies principally on estate of 400_f2d_407 3d cir aff’g 48_tc_251 and rev’g 48_tc_265 in estate of miller the court_of_appeals for the third circuit considered two related decisions on appeal from the court in cases that involved the respective estates of a husband and a wife where the wife predeceased her husband her testamentary plan provided that the residue of her estate was to be held in a_trust with the trust corpus to be divided into two shares id pincite one share of the trust corpus was to equal percent percent share and the other share thereof was to equal percent percent share id the net_income of continued consolidated_returns thus distinguishing it from the taxpayer in textron id like thrifty oil co the instant case is not appealable to the u s court_of_appeals for the first circuit in addition petitioner in the instant case like the taxpayer in thrifty oil co filed consolidated_returns for the taxable years at issue as the parent of a consolidated_return group the percent share was to be distributed to the husband for his life id the husband had a general testamentary_power_of_appointment over the percent share but if he died without exercising that power_of_appointment the income from that share was to be distributed to the couple’s son and the remainder was to be distributed to a charitable corporation id the husband exercised his general_power_of_appointment in his will and provided that upon his death the income from the percent share was to be distributed to the couple’s son and the remain- der was to be distributed to a charitable corporation id pincite the wife’s estate claimed a marital_deduction wife’s marital_deduction equal to the value at the time of her death of the percent share of the trust corpus and a charitable deduction wife’s charitable_contribution_deduction equal to the value at the time of her death of the remainder of percent of the trust corpus id pincite after the husband died the husband’s estate claimed a charitable deduction husband’s charitable_contribution_deduction equal to the value at the time of his death of the remainder of the trust that he had appointed to the charitable corpora- tion id pincite the wife’s will provided that the net_income from the percent share was to be paid to the couple’s son for life with the remainder to his issue 48_tc_251 n aff’d 400_f2d_407 3d cir the court had held in the related cases that the wife’s estate was entitled to both the wife’s charitable_contribution_deduction and the wife’s marital deduc- tion 48_tc_251 and that the husband’s estate was not entitled to the husband’s charitable_contribution_deduction because that deduction was based on the same transfer of the same property to the same charity which also was the basis of the wife’s charitable_contribution_deduction 48_tc_265 the court_of_appeals for the third circuit reversed the court’s decision in the case that involved the husband’s estate and held that that estate was entitled to the husband’s charitable_contribution_deduction estate of miller v commis- sioner f 2d pincite in so holding the court_of_appeals for the third circuit described the circumstances under which the courts have applied the charles ilfeld co case as follows the line of cases cited by the commissioner descending from 292_us_62 54_sct_596 78_led_1127 and allegedly supporting the rule_of tax interpretation that double deductions are not permitted absent express statutory mandate is merely a variation on the avoid absurd results rule in addition this tax rule has rarely been applied outside the peculiar income_tax context of consolidated corporate_income_tax reporting and attempted double deductions of business_losses and it cannot be regarded as a legitimate canon of estate_tax interpretation to assist the court in this case emphasis added fn refs omitted id pincite in a footnote to the above-quoted text the court_of_appeals for the third circuit observed the rule against double deductions seems particularly unuseful in the present case since with respect to one doubling we are pre- sented with separate taxpayers seeking deductions and since we observe that congress has acted explicitly on one occasion to prevent double deductions arising in an estate_tax context see sec_642 with reference to sec_2053 and sec_2054 in addition using broad equitable consideration such as preventing multiple deductions to solve problems raised by a tax statute is a dangerous course eg 252_f2d_456 3rd cir this applies to the commissioner’s observation that his position of a marital_deduction for edna the wife and a charitable deduction for hugh the husband will produce a lower total_tax bill than that resulting from the tax court’s conclusion this ironic wrinkle in this case may simply result from the fact that a wealthier husband sur- vived his wife id n as the court_of_appeals for the third circuit itself pointed out estate of 400_f2d_407 is materially distinguishable from a case like the instant case involving consolidated corporate_income_tax reporting and attempted double deductions of business_losses id pincite indeed in such a case the court_of_appeals for the third circuit has applied charles ilfeld co in order to prevent the double deduction of the same losses see 85_f2d_365 3d cir aff’g 31_bta_374 greif cooperage corp involved the parent of a consolidated_return group that claimed a deduction for losses_incurred in connection with the liquidation of certain of its subsidiaries the commissioner disallowed those losses because that group had already deducted the operating losses of those subsidiaries in holding that the commissioner’s position should be sustained the court_of_appeals for the third circuit relied on 292_us_62 293_us_351 and 78_f2d_940 3d cir rev’g in part 29_bta_139 to support its view that t he law is well settled that liquidating losses such as those incurred by the petitioner in the instant case are not allowable if their allowance results either directly or indirectly in a double deduction by the taxpayer of the same losses greif cooperage corp f 2d pincite the precedent of the court_of_appeals for the third circuit 78_f2d_940 3d cir on which that court relied in greif cooperage corp also involved a consolidated_return group where the commissioner had disallowed what the commissioner determined to be double deductions by that group in that case a subsidiary in that group had certain operating losses subsidiary operating losses that the consolidated_return group had deducted for taxable years preceding the taxable_year at issue thereafter the parent of the consolidated_return group dissolved that subsidiary and claimed for the taxable_year at issue a deduction for a loss investment loss with respect to the parent’s investment in that dissolved subsidiary the commissioner disallowed that claimed deduction commissioner v nat’l casket co b t a pincite the board_of_tax_appeals board held that the taxpayer was not entitled to deduct the investment loss to the extent that that loss equaled the total amount of subsidiary operating losses that the subsidiary in question had over the period in which it was a member of the consolidated_return group reduced by the operating gains or profit that that subsidiary had over that same period id pincite the court_of_appeals for the third circuit reversed the decision of the board in so far as it allowed the operating losses of the subsidiary to be reduced by the profits of the subsidiary commissioner v nat’l casket co f 2d pincite in so doing the court_of_appeals began its analysis by quoting and relying on the following excerpt from charles ilfeld co where all the members gain total taxable_income is the same on a consolidated_return as upon separate ones but where as in the case before us the subsidiaries lose and the parent gains the losses of the former go in reduction of the taxable_income of the latter considerations that justify inclusion of the profits made by all the members do not support the double deduction claimed id quoting charles ilfeld co v hernandez u s pincite the court_of_appeals for the third circuit then paraphrased and applied the above-quoted excerpt to the issue before it as follows we paraphrase this statement and apply it to the instant case where in both the parent and the subsidiary gained the total taxable_income was the same on the consolidated_return as upon separate ones where however the subsidiary sustained losses and the parent gained the losses of the former went in reduction of the taxable_income of the latter the effect of this is that the parent ’s tax burden remained the same in the year when the subsidiary gained but was lessened in and the years when the subsidiary lost in the instant case the parent took credit in and for the gross operating losses sustained by the subsidiary and thereby reduced the income_tax which it would have been obliged to pay on its own gross_profits for the three years in question the fact that an income_tax was paid on the profit earned by the subsidiary in did not increase the income_tax the parent was obliged to pay on its own profit for that year in our opinion credit for the investment loss should be allowed only to the extent to which the investment loss exceeds the credit already taken by the parent for the operating losses sustained by the subsidiary during the three years in question of subsidiary losses in effect what the board did when it reduced the subsidiary operating losses by the profit was to allow the parent to take credit for a profit emphasis added id pincite the lesson of the opinions of the court_of_appeals for the third circuit in 85_f2d_365 78_f2d_940 and estate of 400_f2d_407 is not in doubt that lesson is that that court will apply charles ilfeld co in any federal_income_tax case involving a consolidated_return group where the group claims a deduction for a taxable_year for an economic loss that duplicates another deduction already taken by the group for the same economic loss the court concludes that the view of this court with respect to the application of charles ilfeld co as summarized and expressed most recently in thrifty oil co is fully consistent with the view of the court_of_appeals for the third circuit with respect to the application of charles ilfeld co as summarized and expressed in greif cooperage corp nat’l casket co and estate of miller accordingly as the court did in thrifty oil co the court will first determine in the instant case whether the respective deductions under sec_165 for taxable_year sec_2002 and of a total of dollar_figure of a the asset losses in question and b the asset losses in question and for taxable_year of dollar_figure of the stock loss in question represent the same economic loss es thrifty oil co v commissioner t c pincite to petitioner if the court concludes that those respective deductions do represent the same economic losses to petitioner the court will determine whether a specific provision exists demonstrating congress’ intent to allow the double deductions id it is respondent’s position that by claiming the respective deductions for taxable_year sec_2002 and that are attributable to the asset losses in question and the asset losses in question after having previously taken a deduction for taxable_year that is attributable to the stock loss in question petitioner is recogniz ing a single economic loss a second time in support of that position respondent asserts that the depressed value of the original as aquasource stock at year-end reflected the depressed value of as assets at that time so that the loss on the transfer of stock and the losses on the sale of those assets in and represent the same economic loss it is petitioner’s position that there exists a genuine dispute of material fact as to whether and to what extent the asset losses actually ‘duplicate’ the stock loss in question in support of that position petitioner asserts respondent relies on a flawed methodology that is inconsistent with his own regulations for determining that dollar_figure of petitioner’ sec_2002 and asset losses purportedly duplicated the stock loss in question if petitioner’s motion is denied petitioner will challenge at trial respondent’s erroneous determination of the amount of purported duplicated losses accordingly there is a respondent acknowledges that the respective deductions for taxable_year sec_2002 and that are attributable to the asset losses in question and the asset losses in question and the deduction for taxable_year that is attributable to the stock loss in question duplicate the same economic loss to petitioner only to the extent of dollar_figure the amount of the deduction for taxable_year that is attributable to the stock loss in question material issue of fact as to the amount of losses that were duplicated respondent counters it is undisputed that petitioner claimed a stock loss of dollar_figure based on a date sale of as aquasource stock it is also undisputed that petitioner claimed losses on as asset sales in the amounts of dollar_figure and dollar_figure in the year sec_2002 and respectively it is further undisputed that by the end of all assets of as had been sold there can be no genuine dispute that a decrease in the value of the assets of a corporation and the decrease in value of the stock of the corporation represent the same economic decline in value based on the above respondent has established facts demonstrating beyond dispute that the and asset losses duplicated the stock loss to the extent of dollar_figure fn refs omitted the court agrees with respondent that t here can be no genuine dispute that a decrease in the value of the assets of a corporation and the decrease in value of the stock of the corporation represent the same economic decline in value the stock loss in question for which petitioner claimed a deduction for taxable_year is attributable to petitioner’s claimed sale on date of certain class a stock of aquasource that petitioner owned the asset losses in question and the asset losses in question for which petitioner claimed respective deductions for taxable_year sec_2002 and are attributable to aquasource’s sales in of certain of its assets and its sale in of all of its remaining assets the value of petitioner’s class a stock in aquasource at the end of reflected the value of all of the assets that aquasource owned at that time and that it sold in and the court concludes that there is no genuine dispute of material fact as to whether the respective deductions for taxable_year sec_2002 and of a total of dollar_figure of a the asset losses in question and b the asset losses in question and for taxable_year of dollar_figure of the stock loss in question represent the same economic loss es thrifty oil co v commissioner t c pincite to petitioner the court further concludes that the respective deductions for taxable_year sec_2002 and of a total of dollar_figure of a the asset losses in question and b the asset losses in question and for taxable_year of dollar_figure of the stock loss in question the court notes that petitioner’s bald assertions that if the court were to deny petitioner’s motion with respect to respondent’s alternative determinations there is a material issue of fact as to the amount of losses that were duplicated and that p etitioner will challenge at trial respondent’s erroneous determination of the amount of purported duplicated losses do not establish that there is a genuine dispute of material fact requiring the court to deny respondent’s motion see rule d when a motion for summary_judgment is made an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but such party’s response must set forth specific facts showing that there is a genuine dispute for trial if the adverse_party does not so respond then a decision if appropriate may be entered against such party represent the same economic loss es id and therefore are duplicate or double deductions the court addresses now whether a specific provision exists demonstrating congress’ intent to allow the double deductions id it is petitioner’s position that even though petitioner has taken a deduction for taxable_year for dollar_figure of the stock loss in question sec_165 is the specific provision demonstrating congress’ intent to allow petitioner also to take the respective deductions for taxable_year sec_2002 and of all of the asset losses in question and all of the asset losses in question in support of that position petitioner argues that because sec_165 by its terms entitles petitioner to the respective deductions for taxable_year sec_2002 and of all of the asset losses in question and all of the asset losses in question charles ilfeld co does not control resolution of the duplicate deductions issue in thrifty oil co the court considered and rejected an argument of the taxpayer that is very similar to the argument of petitioner in the instant case there the taxpayer argued that because sec_162 entitled it to the respective deductions for the years at issue of the environmental remediation expenses at issue in that case charles ilfeld co did not control resolution of the duplicate deductions issue thrifty oil co v commissioner t c pincite in rejecting that argument the court concluded that general allowance provisions are insufficient to demonstrate the necessary intent by congress to allow a double deduction id the court concludes that sec_165 which is involved in the instant case like sec_162 which was involved in thrifty oil co is a general allowance provision the court further concludes that petitioner has failed in the instant case to point to a specific provision authorizing the double deduction see id before considering certain additional arguments of duquesne that the court did not expressly address in thrifty oil co the court will address petitioner’s objection to the methodology that respondent used to determine the respective amounts of the respective deductions for taxable_year sec_2002 and of the asset losses in question and the asset losses in question that respondent disallowed in the notice in respondent’s alternative determinations according to petitioner those determinations had the effect of treating a greater amount of the asset losses in question as ‘duplicated’ than would have been the case if respondent had instead treated the sales asset losses in question as in the amicus brief that duquesne filed in thrifty oil co duquesne equated sec_162 and sec_165 it argued there that both the instant case and the thrifty oil co case involve deductions being claimed under a long-standing code provision that on its face clearly permits the deduction first soaking up the duplicated losses and applied only the remaining duplicated_loss to as the court understands the above-quoted excerpt from one of petitioner’s filings if the court were to conclude as the court has that under charles ilfeld co petitioner is not entitled to respective deductions for taxable_year sec_2002 and of a total of dollar_figure of the asset losses in question and the asset losses in question the court should reject respondent’s determinations to disallow dollar_figure of the asset losses in question and dollar_figure of the asset losses in question and instead should disallow all i e dollar_figure of the asset losses in question and only so much of the asset losses in question ie dollar_figure as would when added to the disallowed amount ie dollar_figure of the asset losses in question equal dollar_figure respondent has the same understanding that the court has about what petitioner is suggesting in the above-quoted excerpt thus in response to petitioner’s objection described above respondent states though respondent believes that the allocation between years is a moot point and that in any event the allocation he made between the and years is reasonable respondent also notes that petitioner has suggested an alternative allocation should it be necessary to address an allocation issue respondent is willing to agree to the alternative allocation suggested by petitioner any potential allocation issue in this case would appear to be resolved thus petitioner suggested that the duplicated amount for each of the year sec_2002 and be computed as if respondent had treated the sales as first soaking up the duplicated_loss and applied only the remaining duplicated_loss to petitioner’s objection pincite this would result in an adjustment of dollar_figure to the year and dollar_figure dollar_figure less dollar_figure to the year emphasis added the court accepts what it understands to be respondent’s concession in the above-quoted paragraph respondent’s allocation concession that if the court were to conclude as the court has that under charles ilfeld co petitioner is not entitled to respective deductions for taxable_year sec_2002 and of a total of dollar_figure of the asset losses in question and the asset losses in question petitioner is not entitled to any of the dollar_figure of asset losses in question and dollar_figure of the dollar_figure of asset losses in question the court turns next for the sake of completeness to certain arguments not relating to the application of charles ilfeld co that duquesne advanced in its amicus brief in the thrifty oil co case to which the court did not specifically respond in thrifty oil co and that it advances in the instant case in advancing those arguments there and here duquesne places great weight on the state of the consolidated_return_regulations at the time of the various transfers in question that according to the commissioner gave rise to double deductions in thrifty oil co and in the instant casedollar_figure sec_1501 provides that an affiliated_group_of_corporations shall have the privilege of filing a consolidated_income_tax_return in sec_1502 congress delegated to the secretary_of_the_treasury secretary authority to prescribe such regulations as he may deem necessary in order that the tax_liability of any affiliated_group_of_corporations making a consoli- dated return and of each corporation in the group both during and after the period of affiliation may be returned determined computed assessed collected and adjusted in such manner as clearly to reflect the income-tax liability and the various factors necessary for the determination of such liability and in order to prevent avoidance of such tax_liability in before the stock transfer involved here took place the u s court_of_appeals_for_the_federal_circuit court_of_appeals_for_the_federal_circuit considered the validity of the so-called loss_disallowance_rule that the secretary had prescribed in sec_1 income_tax regs see rite aid corp v the taxable years in thrifty oil co relating to the application of 292_us_62 were taxable years ended date and the taxable years in the instant case relating to the application of charles ilfeld co are taxable years and sec_1 income_tax regs the validity of which was before the court_of_appeals_for_the_federal_circuit prevented the parent_corporation of a consolidated_group of companies from claiming a loss on the sale of subsidiary stock to the extent of the subsidiary’s duplicated_loss factor loss_disallowance_rule the duplicated_loss factor was calculated as the excess of the subsidiary’s continued united_states 255_f3d_1357 fed cir that rule which the taxpayer argued in rite aid corp was an invalid exercise of the secretary’s authority under sec_1502 prevented the taxpayer the parent of a consolidated_return group from deducting under sec_165 a loss on the sale of certain stock of one of its subsidiaries see id pincite the court_of_appeals_for_the_federal_circuit held that the loss_disallowance_rule in sec_1 income_tax regs exceeded the authority that congress had delegated to the secretary in sec_1502 see id pincite in so holding the court_of_appeals_for_the_federal_circuit concluded the purpose of sec_1502 is to give the secretary authority to identify and correct instances of tax_avoidance created by the filing of consolidated_returns but sec_1502 does not authorize the secretary to choose a method that imposes a tax on income that would not otherwise be taxed id am standard inc v united_states 602_f2d_256 income_tax_liability is not imposed by the secretary’s regulations but by the internal_revenue_code id therefore in the absence of a problem created from the filing of consolidated_returns the secretary is without authority to change the application of other tax code provisions to a group of affiliated corporations filing a consolidated_return id pincite0 continued adjusted_basis in its assets over the value of its assets immediately after the sale of such stock 255_f3d_1357 fed cir in response to rite aid corp the internal_revenue_service service issued notice_2002_11 2002_1_cb_526 in which the service set forth its position with respect to the holding in that case that the loss_disallowance_rule in sec_1 income_tax regs was an invalid exercise of the secretary’s authority under sec_1502 that notice stated in rite aid the federal_circuit held that the duplicated_loss component of sec_1 of the income_tax regulations which disallows certain losses on sales of stock of a member of a consolidated_group was an invalid exercise of regulatory authority the internal_revenue_service believes that the court’s analysis and holding were incorrect nevertheless the service has decided that the interests of sound tax_administration will not be served by continuing to litigate the validity of the loss_duplication_factor of sec_1 moreover because of the interrelationship in the operation of all of the loss disallowance factors the service has decided that new rules governing loss disallowance on sales of stock of a member of a consolidated_group should be implemented on date the service issued notice_2002_18 2002_1_cb_644 in which it announced the intention of the u s department of the treasury treasury to promulgate regulations to prevent the duplication of losses within a consolidated_return group upon the disposition of the stock of a member of the group in that notice the service stated t he irs and treasury believe that a consolidated_group should not be able to benefit more than once from one economic loss accordingly the irs and treasury intend to issue regulations that will prevent a consolidated_group from obtaining a tax_benefit from both the utilization of a loss from the disposition of stock or another asset that reflects the basis of stock and the utilization of a loss or deduction with respect to another asset that reflects the same economic loss it is petitioner’s position in the instant case that the result sought by respondent could only be obtained by issuing regulations in support of that position petitioner asserts although petitioner’ sec_2001 stock loss would have been disallowed under the duplication factor of sec_1 had such regulation not been invalidated by 255_f3d_1357 fed cir it was considered valid when incurred and claimed in light of rite aid and the consequent with- drawal of the loss duplication regulations moreover the new regulations sec_1_1502-35t temporary income_tax regs fed reg date which similarly attack a duplicated_loss situation by deferring or denying the stock loss were not effective in time to cover the stock loss and for other reasons did not operate to disallow the asset losses at no time did treasury or service in these announcements and regulations inform taxpayers that duplicated losses would be attacked under ilfeld in situations in duquesne’s amicus brief duquesne argued treasury is responsible for drafting and implementing regulations to address the complexities of the consolidated_return regime when it does not do so taxpayers subject_to that regulatory regime should not be expected to set_aside the plain meaning of applicable code provisions and fill in regulatory gaps based on nebulous and inconsistently applied judicial principles although the court in thrifty oil co did not expressly respond to duquesne’s argument the court implicitly rejected it when it held that the taxpayer in that case was not entitled to the double deductions at issue there where such losses were not subject_to either the invalidated regula- tions or the new regulations petitioner argues that after the court_of_appeals_for_the_federal_circuit issued its opinion in rite aid corp and the service announced its intention to stop litigating cases under the loss_disallowance_rule n othing was said by the service about ilfeld or any intention by the service to challenge duplicated losses based on theories or principles outside of the consolidated_return_regulations indeed according to petitioner the post-rite aid announcements and regulations issued by treasury and the irs in february and date made it quite clear that the asset losses in question were not subject_to challenge as duplicated losses although petitioner’s arguments are not altogether clear it appears that petitioner maintains that the court does not have the authority to disallow the respective deductions at issue for taxable_year sec_2002 and that are attributable to the asset losses in question and the asset losses in question in the absence of consolidated_return_regulations promulgated by the treasury that authorize the disallowance of those deductions the court disagrees the court acknowledges that the court_of_appeals_for_the_federal_circuit a court to which no appeal in any case in this court would lie held in rite aid corp that the loss_disallowance_rule in sec_1 income_tax regs was an invalid exercise of the secretary’s authority under sec_1502 the court also is aware that the service issued several notices setting forth its views on that holding and that case and more broadly on the impropriety of the duplication of deductions for the same economic loss in addition the court agrees with petitioner that for various reasons sec_1_1502-35t temporary income_tax regs supra does not require the disallowance of the respective deductions for the stock loss in question the asset losses in question and or the asset losses in question nonetheless the court concludes that rite aid corp the several notices that the service issued after rite aid corp and sec_1_1502-35t temporary income_tax regs supra do not prohibit the court from determining whether under charles ilfeld co duplicate deductions for the same economic loss are allowable petitioner’s reliance on rite aid corp in support of its argument that the result sought by respondent in the instant case could only be obtained by issuing regulations is misplaced in rite aid corp the court_of_appeals_for_the_federal_circuit considered and decided the sole issue presented to the court in the parties’ respective motions for summary_judgment of whether sec_1 was a proper exercise of the secretary of the treasury’s regulatory authority rite aid corp f 3d pincite the court_of_appeals_for_the_federal_circuit did not consider let alone decide whether the duplicated_loss at issue in rite aid could or should be disallowed on any other ground including under charles ilfeld co on the basis of the record before the court and respondent’s allocation concession the court concludes that petitioner is not entitled to respective deductions for taxable_year sec_2002 and for any of the dollar_figure of the asset losses in question and dollar_figure of the dollar_figure of the asset losses in question or a total of dollar_figure of disallowed deductions for those respective taxable years the court will deny petitioner’s motion insofar as petitioner asks the court in that motion to allow respective deductions for taxable_year sec_2002 and for all of the asset losses in question and all of the asset losses in question the court will grant respondent’s motion insofar as respondent asks the court in that motion to disallow respective deductions for taxable_year sec_2002 and totaling dollar_figure of the asset losses in question and the asset losses in question statute_of_limitations issue the parties disagree about whether the period of limitations for taxable_year is extended pursuant to sec_6501 to include the period described in the period of limitations under sec_6501 as extended under sec_6501 for taxable_year expired on date as pertinent here sec_6501 provides in a case where an amount has been applied credited or refunded under sec_6411 relating to tentative carryback and refund adjustments by reason of a net_operating_loss_carryback or a continued sec_6501 for purposes of permitting respondent to assess a deficiency for that taxable_year that is attributable to the disallowance of the continued capital_loss_carryback to a prior taxable_year the period described in subsection a of this section for assessing a deficiency for such prior taxable_year shall be extended to include the period described in subsection h except that the amount which may be assessed solely by reason of this subsection shall not exceed the amount so applied credited or refunded under sec_6411 reduced by any amount which may be assessed solely by reason of subsection h as pertinent here sec_6501 which creates an exception to the general_rule set forth in sec_6501 provides in the case of a deficiency attributable to the application to the taxpayer of a capital_loss_carryback such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the taxable_year of the net_capital_loss which results in such carryback may be assessed the parties agree that the period of limitations under sec_6501 as extended in writing under sec_6501 for taxable_year would have expired on date petitioner filed the petition commencing this case before that date pursuant to sec_6503 the period of limitations for taxable_year that would have expired on date is suspended until days after the decision in the instant case becomes final the amount of the deficiency that the commissioner may assess under sec_6501 is limited by that section see supra note asset losses in question which were carried back from taxable_year to taxable_year according to petitioner even assuming arguendo that a deficiency exists with respect to the asset losses carryback the courts and the service would permit adjustments to the asset losses in question for the purpose of determining a deficiency for petitioner’s tax_year only if the asset losses impact the amount of the carryback of the asset losses the court does not understand what petitioner is attempting to argue with respect to the statute_of_limitations issue in the above-quoted passage what the court does understand is the meaning of sec_6501 and k and the operation of those provisions in 71_tc_391 the court explained sec_6501 and k as follows w here respondent uses the extended limitations_period of sec_6501 he may assess a deficiency only to the extent that the deficiency is attributable to the application to the taxpayer of a loss carryback respondent may not use the extended limitations_period the period of limitations under sec_6501 as extended in writing under sec_6501 for taxable_year expired on date the parties agree that under sec_6501 the period of limitations for taxable_year has not expired in the case of any deficiency for that taxable_year that is attributable to the disallowance of the asset losses in question that were carried back from taxable_year to taxable_year to assess a deficiency attributable to items unrelated to the loss carryback however sec_6501 now sec_6501 supersedes subsection h restriction on the nature of deficiencies that may be assessed within the extended period where there is a refund granted under sec_6411 by reason of a net_operating_loss_carryback respondent may thus assess within the extended period a deficiency on grounds not attributable to the carryback so long as the deficiency does not exceed the amount of the refund reduced by any amount of the deficiency actually attributable to the carryback 59_tc_716 in other words the amount of deficiency attributable to the disallowance of the loss carryback is assessable under and subject_to the limitations of sec_6501 and the rest of the total tentative refund is assessable under and subject_to the limitations of sec_6501 sec_6501 see h rept 89th cong 2d sess 1966_2_cb_902 sec_301_6501_m_-1 example proced admin regs on date petitioner filed form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year dollar_figure of which was attributable to the asset losses in question pursuant to sec_6411 respondent paid petitioner a tentative refund of dollar_figure with respect to form_1139 that it had filed on date petitioner filed form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year thereafter on date petitioner filed a second form_1139 in which it carried back from taxable_year dollar_figure of long-term_capital_losses to taxable_year thus a total of dollar_figure of long-term_capital_losses was carried back from taxable_year to taxable_year dollar_figure of which was attributable to the asset losses in question pursuant to sec_6411 respondent paid petitioner tentative refunds totaling dollar_figure with respect to the two forms that it had filed on the basis of the record before the court the court concludes sua sponte that pursuant to sec_6501 the period of limitations for taxable_year is extended to include the period described in sec_6501 for purposes of permitting respondent to assess a deficiency for that taxable_year that is attributable to the disallowance of the asset losses in question which were respondent agrees with petitioner that there is no genuine dispute of material fact with respect to the statute_of_limitations issue respondent does not ask in respondent’s motion that the court grant summary adjudication in favor of respondent on the statute_of_limitations issue respondent however opposes petitioner’s request in petitioner’s motion that the court grant summary adjudication in favor of petitioner on the statute_of_limitations issue see supra note sec_23 and sec_28 carried back from taxable_year to taxable_year the amount of that deficiency for taxable_year that respondent may assess solely by reason of sec_6501 may not exceed the amount of the tentative refund that respondent paid to petitioner under sec_6411 for taxable_year reduced by any amount which may be assessed for taxable_year solely by reason of section h sec_6501 see jones v commissioner t c pincite the court will deny petitioner’s motion insofar as petitioner asks the court in that motion to conclude that sec_6501 does not extend the period of limitations for taxable_year to include the period described in sec_6501 for purposes of permitting respondent to assess a deficiency for that taxable_year that is attributable to the disallowance of the asset losses in question which were carried back from taxable_year to taxable_year and that is in an amount which does not exceed the limitations prescribed by sec_6501 see supra note see supra note the court has considered all of the respective arguments and contentions of the parties that are not discussed herein and the court finds them to be without merit irrelevant and or mootdollar_figure to reflect the foregoing and respondent’s concessions an appropriate order and decision under rule will be entered as discussed above see supra note petitioner asks the court in petitioner’s motion to grant summary adjudication in its favor on certain issues in addition to the issues that the court addresses herein the court’s holdings herein and certain concessions of respondent see supra note have made those other issues moot and the court will not consider them and will deny petitioner’s motion with respect to them thus there are no unresolved issues that remain in this case


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-159773-02 date date legend x date dear this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the shareholders of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-159773-02 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not timely file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 effective date with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent s dianna k mosi sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers ------------------------------------------------------ ------------------------------------------------ ----------------------------- --------------------------- ---------------------------- department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 - plr-142243-11 date date legend x ----------------------------------------------------------- ------------------------------------------------------ y ----------------------------------------------------------- ---------------------------------------------------------- z ----------------------------------------------------------- ---------------------------------------------------- country country a b c dear ------------------ --------- ----------------- ---------------- ---------------------- -------------------------- we received a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for the entity to file an election under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes this letter responds to that request plr-142243-11 facts the information submitted discloses that x was formed on a as a limited_liability_company under the laws of country and y and z were formed on b and c respectively as limited_liability companies under the laws of country x y and z each failed to file timely a form_8832 entity classification election to be classified as a disregarded_entity for federal tax purposes effective a b and c respectively law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides plr-142243-11 that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based on the facts and representations submitted x has established that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied consequently x is granted an extension of time of one hundred twenty days from the date of this letter to elect under sec_301_7701-3 to be treated as a disregarded_entity effective a x must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayers requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent plr-142243-11 under a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely associate chief_counsel passthroughs special industries by s james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury washington dc person to contact telephone number refer reply to cc it a plr-113500-00 plr-113503-00 date date internal_revenue_service number release date index numbers legend a b c d e date date x y dear ein ein ein ein you have requested a ruling be issued to a under sec_301_9100-1 of the procedure and administration regulations on behalf of its subsidiaries b and c specifically you have requested permission for b and c to each file a form_970 application to use lifo inventory_method for the year ended date this ruling_request is made in accordance with sec_301_9100-3 during the tax_year ended date a’s wholly-owned subsidiary d transferred certain assets and liabilities to two newly-created corporations b and c specifically d transferred the assets and liabilities comprising its x and y business to respectively b and c a has represented that these transfers were made in pursuance of plans to distribute all of b and c's stock to itself in transactions qualifying under sec_355 of the internal_revenue_code and that the transfers were governed by sec_368 included in the assets transferred was inventory that d had historically identified using the last-in_first-out lifo_method subsequent to their receiving their respective inventory both b and c began to use the lifo_method that had been used previously by d however a failed to file the required form_970 for either b or c the lifo_method has continued to be used by b and c to the current time for federal_income_tax purposes the lifo_method has also been used for this inventory for financial reporting purposes recently a changed the accounting firm that reviews and signs its federal_income_tax returns during a review of the date return the new accounting firm e noticed that a had not filed the required form 970s for b and c a is requesting a ruling so that these missing documents may be deemed to have been timely filed sec_472 provides that a taxpayer may use the lifo_method of inventorying goods specified in an application to use such method filed at such time and in such manner as the secretary may prescribe sec_1_472-3 of the income_tax regulations provides that the lifo inventory_method may be adopted and used only if the taxpayer files with its income_tax return for the tax_year as of the close of which the method is first to be used a statement of its election to use such inventory_method the statement shall be made on form_970 pursuant to the instructions printed with respect thereto and to the requirements of this section or in such other manner as may be acceptable to the commissioner under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of the time to make a regulatory election under all subtitles of the code except subtitles e g h and i provided that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interest of the government sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin an election includes an application_for relief in respect of tax and a request to adopt change or retain an accounting_method or accounting_period sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections if the provisions of sec_301_9100-2 do not apply to a taxpayer's situation the provisions of sec_301_9100-3 may apply sec_301_9100-3 sets forth the standards that the commissioner will use in determining whether to grant an extension of time to make a regulatory election it also sets forth information and representations that must be furnished by the taxpayer to enable the internal_revenue_service to determine whether the taxpayer has satisfied these standards the standards to be applied are whether the taxpayer acted reasonably and in good_faith and whether granting relief would prejudice the interests of the government under sec_301_9100-3 a taxpayer that applies for relief for failure to make an election before the failure is discovered by the service ordinarily will be deemed to have acted reasonably and in good_faith however pursuant to sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested or if the taxpayer was informed in all material respects of the required election and related tax consequences and chose not to make the election furthermore a taxpayer ordinarily will not be considered to have acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all tax years affected by the regulatory election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money likewise if the tax consequences of more than one taxpayer are affected by the election the government's interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the tax_year in which the regulatory election should have been made or any_tax year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment before the taxpayer receives the ruling granting relief under sec_301_9100-1 the information and representations furnished by a establish that it b and c have acted reasonably and in good_faith in this request furthermore granting an extension will not prejudice the interests of the government accordingly an extension of time is hereby granted for a to file a form_970 for b and c the form sec_970 shall be filed for the tax_year ended date this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the form sec_970 when they are filed no opinion is expressed as to the application of any other provisions of the code or the regulations which may be applicable specifically no opinion is expressed in regard to b c or d's use of the lifo_method pursuant to a power_of_attorney on file in this office a copy of this ruling is being sent to a and a's authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours heather maloy associate chief_counsel income_tax and accounting by james atkinson acting deputy associate chief_counsel