§1502 — Regulations

Accordingly, unlike TMBCI, Uniband is subject to Federal income tax. II. Consolidated return issue We now turn to Uniband's alternative claim that for tax years 1996, 1997, and 1998 it was entitled to and did properly file consolidated returns with its sister corporation TMMC. The filing ofa consolidated return is a "privilege", sec. 1501, as to which the Secretary is explicitly authorized to promulgate regulations,25 sec. 1502.

Section 1502 provides that the Secretary shall prescribe such regulations as he may deem necessary in orderthat the tax liability ofthe affiliated group, and ofeach ofits members, may be computed, assessed, and collected in such manner as to clearly reflect its income tax liability and to prevent avoidance oftax liabili

* * * Pursuant to section 1502, Congress has granted to the Secretary of the Treasury broad authority to prescribe such regulations as he may deem necessary with respect to the making of consolidated returns.

Regulations substantially the same as section 1.1502- 77(c)(2), Income Tax Regs., were first issued as article 17(a)(2) of Regulations 7534 under the authority of section 141(b) of the 33 Section 1502 provides: The Secretary shall prescribe such regulations as he may deem necessary in order that the tax liability of any affiliated group of corporations making a consolidated return and of each corporation in the group, both during and after the period of affiliation, may be returned, determined,

, and 1998 it was entitled to and did properly file consolidated returns with its sister corporation TMMC. The filing of a consolidated return is a “privilege”, sec. 1501, as to which the Secretary is explicitly authorized to promulgate regulations, sec. 1502. To prevail with this claim, Uniband must show that Uniband and TMMC were part of an affiliated group of corporations and that the group filed valid consolidated returns for the years in issue. Uniband’s claim fails for multiple reasons. A.

Petitioners counter that section 1.1502 — 77(c)(2), Income Tax Regs., “is an invalid exercise of the Secretary’s rule-making authority.” According to petitioners, Nothing in section 1502 authorizes the Secretary to promulgate regulations that create agency relationships between corporations that never were part of the affiliated group, yet this is precisely what the Secretary purports to have done in Treas.

(continued...) -291- provide no analysis of the partnership basis rules (specifically section 704(c)) but instead focus on the recognition or nonrecognition of gain or loss under section 351, the consolidated loss disallowance and separate return limitation year rules under section 1502, the built-in loss limitations of section 382, the section 384(a) pre-acquisition loss rules, and the section 269(a)(2) disallowance rules for tax-motivated corporate acquisitions.

dated Federal income tax returns for both years involved as permitted by section 1501. Section 1503(a) provides that in any case in which a consolidated return is made, the tax shall be determined in accordance with the regulations promulgated under section 1502. Section 1502 provides that the Secretary shall prescribe such regulations as he may deem necessary in order that the tax liability of the affiliated group, and of each of its members, may be computed, assessed, and collected in such man

The making of a consolidated return shall be upon the condition that all corporations which at any time during the taxable year have been members of the affiliated group consent to all the consolidated return regulations prescribed under section 1502 prior to the last day prescribed by law for the filing of such return.

The making of a consolidated return shall be upon the condition that all corporations which at any time during the taxable year have been members of the affiliated group consent to all the consolidated return regulations prescribed under section 1502 prior to the last day prescribed by law for the filing of such return.

grants the authority for affiliated corporations to file consolidated income tax returns, provides that, upon filing a consolidated return, the members of the consolidated group consent to all of the consolidated return regulations prescribed under section 1502. Section 1502 provides that the Secretary shall prescribe such regulations as may be deemed necessary so that the tax liability of an affiliated group may be returned, determined, computed, assessed, collected, and adjusted in such a man

at 1273-1274 (1968) (enacting 44 U.S.C. sec. 1502 (1982)). The National Archives Establishment was created in 1934. Act of June 19, 1934, ch. 668, secs. 2-3, 48 Stat. at 1122 (codified as amended at 44 U.S.C. secs. 300(a), 300(c) (1946)). In 1949, it became part of the General Services Administration and was renamed the National

n another record.” C. Investment Basis Adjustments and Excess Loss Accounts Section 1501 allows affiliated corporations to join together to file a single consolidated return. The mechanics of doing so are spelled out in regulations promulgated under section 1502. Although the consolidated return regulations endeavor, to the extent possible, to treat the members of a consolidated group as a single corporation, they often bow to the reality of the members’ separate existence. For example, the regu

1502 (providing that the Secretary shall prescribe regulations that are necessary to determine consolidated groups' tax liabilities). Petitioner argues that these consolidated return regulations "require the determination ofan individual member's share ofthe consolidated group's CNOL." The Code applies to a consolidated group to the extent tha

In section 1502, Congress delegatedto the Secretary ofthe Treasury (Secretary) authority to: prescribe such regulations as he may deem necessary in order that the tax liability ofany affiliated group ofcorporations making a consoli- dated return and ofeach corporation in the group, both during and after the period ofaffiliation, may be returned, deter

ommon parent corporation ofa consolidated group may be a partner when a subsidiary member ofthe group is a partner in the partnership, because the common parent and each subsidiary member ofthe common group is severally liable for tax computed under section 1502. Rev. Rul. 2006-11, 2006-1 C.B. 635.4 Indirect partners under section 6231(a)(10), which are "person[s] holding an interest in a partnership through 1 or more pass-thru partners", are also deemed partners under section 6231(a)(2)(B). PCM

on parent corporation of a consolidated group may be a partner when a subsidiary member of the group is a partner in the partnership, because the common parent and each subsidiary member of the common group is severally liable for tax computed under section 1502. Rev. Rul. 2006-11, 2006-1 C.B. 635. Indirect partners under section 6231(a)(10), which are “person[s] holding an interest in a partnership through 1 or more pass-thru partners”, are also deemed partners under section 6231(a)(2)(B). PCMG

The Taxpayers' wages reported on - 20 - their Form W2 would have been reduced . E" The fact that Keys Holdings is a disregarded entity should not change the result. Again, petitioners seek a tax treatment that is inconsistent with the structure that Carlos created for his business dealings . Petitioners received wages from Keys Granite,

It provides that if the nonlife subgroup has an NOL for the year, the NOL must first be carried back and used to offset income of the nonlife subgroup in prior years .

subgroup, whichever is less. The unused portion of the nonlife subgroup’s NOL is available as a carryover to future years. Section 1503(a) requires a taxpayer filing a consolidated return to determine its tax in accordance with the regulations under section 1502. Section 1.1502-47, Income Tax Regs., generally adopts a “subgroup method” for determining CTI of life-nonlife consolidated groups. Sec. 1.1502 — 47(a)(2)(i), Income Tax Regs. It divides the consolidated group into the “life subgroup”, w

1502(a) (Secretary may “establish and promulgate such rules and regulations not inconsistent with the law”)]; AT&T Corp. v. Ia. Util. Bd., 525 U.S. 366 (1999)[issued under 47 U.S.C. sec. 201(b) (“Commissioner may prescribe such rules and regulations as may be necessary”)]; United States v. O’Hagan, 521 U.S. 642 (1997)[issued under 15 U.S.C. se

er, 74 T.C. 836, 840 n.7 (1980). - 62 - The Internal Revenue Code contains numerous specific delegations of authority from Congress to the Secretary or the Commissioner to issue rules or regulations that have the force and effect of law. See, e.g., sec. 1502. These sections--that provide for issuing legislative regulations--would be superfluous if section 7805 were a delegation of authority from Congress to make rules or regulations carrying the force of law. It is a fundamental rule of statutor

1502(a) ((Secretary may “establish and promulgate such rules and regulations not inconsistent with the law”)); AT&T Corp. v. Ia. Util. Bd., 525 U.S. 366 (1999) (issued under 47 U.S.C. sec. 201(b) (“Commissioner may prescribe such rules and regulations as may be necessary”)); United States v. O’Hagan, 521 U.S. 642 (1997) (issued under 15 U.S.C.

mmissioner, 74 T.C. 836, 840 n.7 (1980). The Internal Revenue Code contains numerous specific delegations of authority from Congress to the Secretary or the Commissioner to issue rules or regulations that have the force and effect of law. See, e.g., sec. 1502. These sections— which provide for issuing legislative regulations — would be superfluous if section 7805 were a delegation of authority from Congress to make rules or regulations carrying the force of law. It is a fundamental rule of statu

(a) General Rule.--In any case in which a consolidated return is made or is required to be made, the tax shall be determined, computed, assessed, collected, and adjusted in accordance with the regulations under section 1502 [authorizing the Secretary to establish regulations regarding consolidated tax liability] prescribed before the last day prescribed by law for the filing of such return.

— In any case in which a consolidated return is made or is required to be made, the tax shall be determined, computed, assessed, collected, and adjusted in accordance with the regulations under section 1502 [authorizing the Secretary to establish regulations regarding consolidated tax liability] prescribed before the last day prescribed by law for the filing of such return.

ved in this case, we can readily understand petitioner’s confusion as to respondent’s true position * * *. * * * We cannot fault petitioner for not knowing what the law was in this area when the Commissioner, charged by Congress to announce the law (sec. 1502), never decided what it was himself. * * * Thus, we find that the Commissioner’s regulations regarding the manner in which the accumulated earnings tax was to be imposed on corporations making consolidated returns were ambiguous during the

oney, securities, and any other property; except that such term does not include stock in the corporation making the distribution (or rights to acquire such stock).” 11T.D. 6894, 1966-2 C.B. 362, promulgated new consolidated return regulations under sec. 1502 of the 1954 Code. The new (continued...) - 15 - T.C. Memo. 1966-273, modified and remanded on a different issue sub nom. Likins-Foster Honolulu Corp. v. Commissioner, 417 F.2d 285 (10th Cir. 1969). The 1966 regulations abandoned that rule i

As to petitioner’s economic substance argument, the consolidated return regulations were promulgated under the congressional mandate of section 1502 to regulate the privilege of filing consolidated returns.

ved in this case, we can readily understand petitioner’s confusion as to respondent’s true position * * *. * * * We cannot fault petitioner for not knowing what the law was in this area when the Commissioner, charged by Congress to announce the law (sec. 1502), never decided what it was himself. * * * Thus, we find that the Commissioner’s regulations regarding the manner in which the accumulated earnings tax was to be imposed on corporations making consolidated returns were ambiguous during the

All members of the affiliated group must consent to the consolidated return regulations prescribed under section 1502 prior to the last day prescribed by law for the filing of a consolidated return.

All members of the affiliated group must consent to the consolidated return regulations prescribed under section 1502 prior to the last day prescribed by law for the filing of a consolidated return.

In order to qualify for treatment as a consolidated group, all members must agree to be bound by the consolidated return - 16 - regulations as promulgated by the Commissioner. Sec. 1501. As we see it, petitioner's position ignores those regulations. Section 1.1502-21A(f), Income Tax Regs., provides the exclusive method for computing the

In order to qualify for treatment as a consolidated group, all members must agree to be bound by the consolidated return regulations as promulgated by the Commissioner. Sec. 1501. As we see it, petitioner’s position ignores those regulations. Section 1.1502-21A(f), Income Tax Regs., provides the exclusive method for computing the NOL of

e ruling (namely, Rev. Rul. 82-20, 1982-1 C.B. 6). The majority argues that the above Courts of Appeals, in the cited opinions, give undue weight to the revenue ruling and ignore what the majority regards as the clear mandate of the regulation under section 1502. The majority is correct in stating that revenue rulings do not generally constitute legal precedent or "other law". As the language quoted below, however, from each of the cited opinions indicates, neither the U.S. Courts of Appeals for

e ruling (namely, Rev. Rui. 82-20, 1982-1 C.B. 6). The majority argues that the above Courts of Appeals, in the cited opinions, give undue weight to the revenue ruling and ignore what the majority regards as the clear mandate of the regulation under section 1502. The majority is correct in stating that revenue rulings do not generally constitute legal precedent or “other law”. As the language quoted below, however, from each of the cited opinions indicates, the U.S. Court of Appeals for neither