Brief for the Respondent in Opposition — B. Forman Co. v. Commissioner

4

-’ COMMISSIONER OF INTERNAL tS ;

2S im j . ~~... | Ste: ee ond

| Bathe Super Covet fie Buited States ©

y OCTOBER: TE, 1971

aed

B, FoRMAN COMPANY, INC., ET AL., PETITIONERS

2

d : > . oan ‘

= % 24 ° v. ” 4 =

rs , - ' “a4 bd - “ev . . .

- . J q . .

ON PETITION FOR A. WRIT ie CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

—~ ° THE OND CIRCE *

.F

~

Opinions below. -

pT PN ee

Questions presented = wescnees

Statutes and regulations involved 5

Statement Peabo vison diet ve piers

| EAR A Rhein ae =a |

I cece eee 15-

CITATIONS

Cases:

Ach v. Commissioner, 42 T.C. 114, af-

firmed, 358 F. 2d 342, certiorari de-

nied, 35 US. OT

Advanze Machinery Exch. v. Commission-

er, 196 F. 2d 1006, certiorari } nem,

344 U.S. 835 . = 7

Baldwin-Lima-Hamilton. Corp. ° v. . United

States, 455 F. BA 186 9

Borge v. Commissioner, 405 F. 2d 673, |

certiorari denied sub nom. Danica En-

terprises, Inc. v. Commissioner, 395

U.S. 933 _ = 7

Central Cuba Sugar Co. 1 v. . Commissioner,

26 F.C. 6

Commissioner v. First Security ‘Bank of

Utah, No. 70-305, this Term, decided

March 21, 1972 - ane 6,9

- Forcum-James Co. v. - Commissioner, 7

T.C. 1195, remanded pursuant to stipu-

intien, Rie ¥. $6-S88 8

Onn NO &- & |

Cases—Continued Page

Grenada Industries, Inc. v. Commissioner,

17 T:C. 231, affirmed, 202 F. 2d 873,

certiorari denied, 346 U.S. 819. 8

Hall v. Commissioner, 294 F. 2d 82 _ 7

Huber Homes v. Commissioner, 55 T. C.

le eels 14

Lake Erie & Pittsburg Railway Co. v.

Commissioner, 5 T.C. 558 ~ Stade 8,9

Oil Base, Inc. v. Commissioner, 362 F. 2d

212, certiorari denied, 385 U.S. 928 9

PPG Industries v. Commissioner, 55 T.C. -

ae 14

Philipp Brothers ‘Chemicals, ‘Ine. ( N.Y. )

v. Commissioner, 435 F. 2d 53 | : 9.

Smith-Bridgman & Co. v. Commissioner,

16 T.C. 287, acq. 1951-1 Cum. Bull. 3 14

South Texas Rice Warehouse Co. v. Com-

missioner, 366 F. 2d 890, certiorari de-

nied, 386 U.S. 1016... eee 8

Tennessee-Arkansas Gravel Co. v. Com-

missioner, 112 F. 2d 508... ————S—i, 18, 14

Statutes:

Internal Revenue Code of 1954 (26

U.S.C.) : |

ee ee 7

SD ee ee 7

Dy NE cocci eee _4

ff ae Fs St

2

5

Sec. 957(a) Mada ncenaeacemeaonem a

SINE csscooscserenentaleneotvmepeigaliareetonas va 7

Revenue Act of 1984,-c. 277, 48 Stat.

680, Sec. 45 2

Miscellaneous: 7 Page

Bittker and Eustice, Federal Income Tax- —

ation of Corporations and Sharehold-

ers, Sec.*15.06 aie ed., viens 7,8

30 Fed. Reg. 4256 - BE Ane 12

31 Fed. Reg. 10394. 12

Hewitt, Section 482—Reallocation of In-

come and Deductions Between Related

Persons—Up to Date, 22 N.Y.U. Insti-

tute on Federal Taxation 381 (1964). 8

H. Conf. Rep. No. 2508, 87th wise 2d

Sess., p. 19 - 13

H. Rep. No. 2, 70th Cong., Ist Sess., pp.

|, ine 6

~ Rev. Rul. 65-142, 1965-1 on ‘Bull. 223 8

Rev. Rul. 67-79, 1967-1 Cum. Bull. 117 __ 14

S. Rep. No. 960, 70th Cong., Ist Sess.,

pp. 24-25 . : ue | 6

T.D. 6952, 33 Fed. Reg: 5848 12

T.I.R. 836, 1966 C.C.H. Stand. Fed. Tax.

Rep., par. 6679 - 12

Treasury Regulations on Income Tax

(1954 Code) (26 C.F.R.):

Section 1.482-1. = ——=s-2, 7, 9, 10, 11,

Section 1.482-2 =. sss 2 10-11,

12

12

Iu the Supreme Court of the United States

OCTOBER TERM, 1971

No. 71-1280 .

B. FORMAN COMPANY, INC., ET AL., PETITIONERS

v.

COMMISSIONER OF INTERNAL REVENUE

t

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the Tax Court (Pet. App. A17-—

A39) is reported at 54 T.C. 912. The opinion of the

court of appeals (Pet. App. A40-A72) is reported

~ at 453 F. 2d 1144.

JURISDICTION

. The judgment of the court of appeals. was entered

on January 10, 1972 (Pet. App. A73-A74). The

petition for a writ of certiorari was filed on April

(1) -

2

6, 1972. The jurisdiction of this Court is invoked

under 28 — 1254(1). )

QUESTIONS PRESENTED

1. Whether, for purposes of invoking Section: 482

‘of the Internal Revenue Code of 1954, two unrelated

corporations having a common interest, and a third

- corporation owned equally by them in pursuit of

that interest, are “two or more organizations, trades,

or businesses * * * owned or controlled * * * by the

same interests.”

-2. Whether, assuming petitioners and their joint

subsidiary (Midtown) were under common control,

the Commissioner had the authority to utilize Sec-

_ tion 482 to allocate interest income to petitioners on

interest-free loans which they made to Midtown, ir- ’

respective of whether any of the corporations real-

ized gross income from outside sources as a direct

result of the loans.

STATUTES AND REGULATIONS INVOLVED

The provisions of Section 482 of the Internal Reve-

nue Code of 1954 are set forth in the petition (Pet.

3). The pertinent provisions of Sections 1.482-1 and

1.482-2 of the Treasury Regulations on Income Tax

are set: forth in. the Appendix to the petition (Pet.

App. —:

STATEMENT

Petitioners, B. ‘Forman Company, Ine. and Mc-

Curdy and Company, Inc., are corporations which

3

during. the taxable years in controversy operated .

competing department stores on adjacent sides of the

same block in downtown Rochester, New York. They

were owned by the Forman and McCurdy families,

respectively, and had no common shareholders, di-

rectors or officers. (Pet. App. A18-A19.)

_ .In 1958, petitioners organized Midtown Holdings

Corporation (“Midtown”) for the purpose of con-

structing and operating an enclosed mall shopping

center and office building complex adjoining their

stores. Upon incorporation, each received 50 per- -

cent of Midtown’s issued .and outstanding stock. ~

They subsequently executed a written agreement

which provided that additional stock purchases fram

Midtown would be made equally by each petitioner

and that each would have equal representation on

Midtown’s board of directors. If either party so

requested, an additional director could be appointed,

either by mutual consent or, if there was a: dispute,

by an independent third party. During the relevant

‘ taxable years, Midtown had four directors, two rep-

resenting each aeniie (Pet. App. J A20-A21, A43-

A46.) —

Petitioners also agreed to Joan funds to Midtown

from time to time. These loans were to be made in

equal amounts and were to be evidenced by notes or

other evidences of indebtedness bearing interest at

five percent per annum, with principal due and pay-.

able 30 years after issuance. (Pet. App. A21, A44-

A45.)

- Construction of the donning mall commenced in

1959. To help finance the project, petitioners made

i AD 5 bie gre Sait Buh

.

4

several loans to ‘Midtown, which were consolidated

into 30-year notes totalling $662,500 to each peti- ~

tioner and bearing interest at five percent per annum. ~

‘Midtown paid off these notes in July, 1959, from the

proceeds of a line of credit established with Lincoln

Rochester Trust Company. (Pet. App. A21-A22,

A46-A47.)

In September, 1960, each petitioner loaned Mid-

town an additional $1,000,000 and took back three-

year notes, bearing interest at three and one-half

percent per annum. In April, 1961, the notes were

cancelled without payment of principal or. interest

and replaced by three-year notes, in the same princi-

pal amount, but bearing :no interest and dated back

to September 9, 1960. These noninterest-bearing

notes were renewed for new three year terms on Sep-

tember 9, 1963 and September 9, 1966. During the

period when the interest-free loans remained .out-

_ standing, petitioners each borrowed in excess of

$1,000,000 from various commercial banks, at in-

‘terest rates averaging at least five percent per an-

num. Midtown also borrowed: amounts from com-

mercial lenders during this period at interest rates

ranging from four and one half to six percent per

annum. (Pet. App. A22, A47-A48, A64; R. 67.)’-

Acting pursuant to Section 482 of the 1954 Code

and the Treasury Regulations issued thereunder, the

) Commissioner allocated $50,000 in interest income to

a LR» references are to the separately —_ penn

filed in the court of appeals. “Ex.” references are to exhibits

introduced at the trial.

iB

5

each petitioner during their fiscal years 1965 through

1967, and determined deficiencies accordingly. The

allocation was based on an arm’s length interest rate

of five percent per annum on the $1,000,000 loans

to Midtown and was made to reflect petitioners’ in-

come clearly, as mandated by Section 482 (Pet. App.

A18, A30-A31, A48.). ‘

Petitioners each sought redeterminations in the

Tax Court, where the cases were consolidated. That

court held that the Commissioner had no authority to

invoke Section 482, because petitioners and Midtown

- were not owned or controlled by the same interests,

as required by the statute. Having held that the

requisite statutory control was lacking, the Tax Court

had no occasion to consider the propriety of the Com-

missioner’s allocation. (Pet, App. A30-A34.)

On appeal, the Second Circuit reversed, initially

holding that petitioners and Midtown were two or

more commonly controlled trades or businesses (Pet.

App. A47-A59). It then sustained the Commission-

er’s allocation, reasoning that (Pet. App. A60)

“[rJeallocation is necessary here in order to properly

reflect the income of taxpayers and Midtown.” The

court also approved of the five percent arm’s length

interest rate utilized by the a - . (Pet.

App. meer :

2 Another issue before both courts below, relating to the

deductibility under Code Section 162 of certain payments

made by petitioners to Midtown, has not been raised in the

petition, and the determination of that issue is now final.

6

ARGUMENT

The decision below is correct. There is no direct

conflict of appellate-court decisions or any other basis

for further review at this time.

1. Section 482 of the Internal Revenue Code of

1954 empowers the Commissioner to allocate gross

income among “two or more organizations, trades,

or businesses * * * owned or controlled directly or

indirectly by the same interests * * * if he deter-

_ mines that such * * * allocation is necessary in order

to prevent evasion of taxes or clearly to reflect the

income of any of such organizations * * *.” Consid-

ered only recently in a different context by this Court

in Commissioner v. First Security Bank of Utah,

No. 70-305, this Term, decided March 21, 1972, the

statute is a continuation of prior law enacted to

permit the Commissioner “to deny [to taxpayers]

the power to shift income * * * arbitrarily among

controlled corporations, and to place such corpora-

tions rather 6n a parity with uncontrolled concerns.”

Central Cuba Sugar Co. v. Commissioner, 198 F. 2d

214, 216 (C.A. 2); see H. Rep. No. 2, 70th Cong.,

Ist Sess., pp. 16-17; S. Rep. No. 960, 70th Cong.,

Ist Sess., pp. 24-25.

The threshhold finding of the court of appeals that

petitioners and their joint subsidiary, Midtown, were

two or more trades or businesses owned or controlled

by the same interests fully accords with the language

and purpose of Section 482, as well as the applicable

Treasury Regulations and the trend of recent appel-

late court decisions. Congress drafted the statute

7 ;

broadly so that it would embrace all types of taxable

entities which are “controlled,” even “indirectly,” by

_ © the “same interests.” Unlike other Code sections

which precisely define the term “control” (see, e.g.,

Sections 269(a), 318(a), 368(c), 957(a), 1551),-

Section 482 does not speak in terms of percentages

of stock ownership. To the contrary, as the Regu-

lations liave long provided, it is the “reality of con-

trol” which is critical, and any kind of control, di-

rect or indirect, and however exercised, is sufficient

to justify application of the section. Treasury Regu-

lations on Income Tax (1954 Code), Section 1.482-1

(a) (3). This liberal construction effectuates the un-

derlying policy of the statute and has won increasing

judicial recognition and approval.*

Applying the foregoing criteria to the uncontro-

verted facts of this case, the court of appeals con-

cluded that (Pet. App. A56) petitioners’ “interests

in the existence and career of Midtown and the in-

terests of Midtown are identical.” The court prop-

erly recognized that in their dealings with Midtown,

petitioners were not two unrelated businesses acting

separately. Rather, they were joined by a common

* See Hall v. Commissioner, 294 F. 2d 82 (C.A. 5); Ach v.

Commissioner, 42 T.C. 114, affirmed, 358 F. 2d 342 (C.A. 6),

certiorari denied, 385 U.S. 899; Borge v. Commissioner, 405

F. 2d 673° (C.A. 2), certiorari denied sub nom. Danica En‘er-

prises, Inc. Vv. Commissioner, 395 U.S. 933; Advance Machinery

Exch. v. Commissioner, 196 F. 2d 1006 (C.A. 2), certiorari

denied, 344 U.S. 835. See also Bittker and Eustice, Federal

Income Taxation of Corporations and Shareholders, Sec. 15.06

(3d ed:, 1971).

8

interest and invariably acted in concert vis-a-vis

Midtown, as they were obligated to do by an explicit

_ written agreement. Realistically, control by the same

interests is present here no less than if petitioners

had created an equal partnership to deal with Mid-

town, and had they followed that course, their trans-

actions clearly would have been subject to scrutiny

under Section 482. See, e.g., Grenada Industries,

Inc. v. Commissioner, 17 T.C. 231, affirmed, 202 F. .

2d 873 (C.A. 5), certiorari denied, 346 U.S. 819;

South Texas Rice Warehouse Co. v. Commissioner,

366 F.2d 890 (C.A. 5), certiorari denied, 386 U.S.

1016; Forcum-James Co. v. Commissioner, 7 T.C.

1195, remanded pursuant to stipulation, 176 F. 2d

311 (C.A. 6); Rev. Rul. 65-142, 1965-1 Cum. Bull.

223. Under these circumstances, the court.of ap-

peals reached the right conclusion.

There is no conflict among the circuits on this

point. While suggesting (Pet. 21) that “the courts”

have rejected the Commissioner’s expansive construc-

tion, petitioners refer only to Lake Erie & Pittsburg

Railway Co. v. Commissioner, 5 T.C. 558, whose ra-

tionale is not reconcilable with that of the later de-

cisions and which provides no basis for review by this

court.‘ Moreover, issues such as those involved both

* Lake Erie represents an isolated holding, characterized as

“questionable” by respected tax law commentators. See, e.g.,

Bittker and Eustice, Federal Income Taxation of Corporations

and Shareholders, Sec. 15.06 (3d ed., 1971); Hewitt, Section

482—Reallocation of Income and Deductions Between Related

_Persons—Up to Date, 22 N.Y.U. Inst. on Federal Taxation

381, 384 (1964).

9

here and in Lake Erie, although fundamental, often

depend upon an evaluation of particular facts, such

as the nature of the joint enterprise, and the terms

and conditions adopted by the controlling sharehold-

ers for dealing with their subsidiary. As a result,

questions of control are not readily resolved by means

of a legal rule of general applicability. In any event,

absent a conflict among the circuits as to the proper

legal rule, further review is not warranted.

2. Having properly resolved the control question,

the court of appeals was also correct in upholding

the Commissioner’s. authority to allocate interest in- .

come to petitioners. In testing an allocation under

Section 482, the “standard to be applied * * * is that

of an uncontrolled taxpayer dealing at arm’s length

with another uncontrolled taxpayer.” Treasury Reg-

ulations Section 1.482-1(b) (1), quoted by this Court

in Commissioner v. First Security Bank of Utah,

supra, p. 6. The Commissioner’s authority extends

to any instance where, either by inadvertence or de-

‘sign, the income of commonly controlled taxpayers

is different than it would have been had they dealt

with each other at arm’s length. Oil Base, Inc. v.

Commissioner, 362 F. 2d 212, 214 (C.A. 9), certio-

rari denied, 385 U.S. 928; Baldwin-Lima-Hamilton

Corp. v. United Std@tes, 435 F. 2d 182, 185 (C.A.

7). Moreover, innocent distortions of income, as well

as tax avoidance motives, will support an applica-

tion of Section 482 (Philipp Brothers Chemicals, Inc.

(N.Y.) v. Commissioner, 435 F. 2d 53, 57 (C.A. 2)),

and the Regulations authorize an allocation of gross

i

/

income “notwithstanding the fact that the ultimate

income anticipated * * * may not be realized or is

realized during a later period” or even though the in-

come “is never, in fact, realized by the other mem-

bers” (Treasury Regulations Section 1.482-1(d) (4) ).

A proper application of the arm’s length standard

here requires that the Commissioner’s allocation be

sustained. During the very period in. which peti-

tioners were making substantial loans to Midtown at

no interest, they themselves were ‘borrowing from

unrelated lenders at interest rates averaging at least

5 percent. Had Midtown borrowed $2,000,000 from

an unrelated source (or even from petitioners in an

arm’s length transaction), it obviously would have

been obligated to pay a fair rate of interest, and its

gross income would have been reduced accordingly.

Conversely, although petitioners parted with the use

of their money, they received no compensation for

its use, thereby decreasing the gross income’ they

would have earned had they made an arm’s length

-loan. To contend, as petitioners do (Pet. 10-18),

that the Commissioner may not invoke Section 482

under these circumstances would sanction the very

type of income distortion which Section 482 was de-

signed to prevent and, in the words of the court of

appeals (Pet. App. A62), “seriously impair the use-

fulness” of the statute.°

5 The allocation made in this case is specifically authorized

by Treasury Regulations Section 1.482-2(a), which provides:

[Footnote continued on page 11]

11

8. Despite the foregoing, petitioners seek further

review of the allocation upon the ground that tlie

Commissioner impermissibly “created” income where

none in fact existed, and they assert conflict on this

principle between the holding below and Tennessee-

Arkansas Gravel Co. v. Commissioner, 112 F. 2d 508

_(C.A. 6). In that case, the court rejected the Com-

missioner’s attempt to attribute rental income, under

the allocation authority of Section 45 of the Revenue

Act of 1934, c. 277, 48 Stat. 680, to a taxpayer which

had been leasing equipment on a rent-free basis to

a commonly controlled affiliate. While admittedly

there may be a conflict in principle as to the scope

of the Commissioner’s allocation powers, its nature

is not such as to warrant resolution by this Court at

_ this time.

(a) The current Section 482 Regulations ensure

that income will not be “created” under the circum-

stances of this case, by requiring that correlative ad-

justments be made to the income of the controlled

entity from which an allocation has been made.

Treasury Regulations Section 1.482-1(d) (2). Thus,

hs [Continued]

Where one member of a group of controlled entities

makes a loan or advance directly or indirectly to, or other-

wise becomes a creditor of, another member of such

group, and chargés no interest * * * the district director

may make appropriate allocations to reflect an arm’s

length interest rate for the use of such loan or advance.

The court of appeals upheld the Regulations as (Pet. App.

A62) “entirely consistent with the scope and purpose of

§ 482.”

12

the reallocation involved here not only results in an

increase in petitioners’ income, but also in a reduc-

tion in Midtown’s gross income.’ As long as this

procedure is followed, income is allocated, not cre-

ated, and the controlled parties are placed on a tax

parity with uncontrolled taxpayers—precisely the re-

sult contemplated by Section 482.

(b) The holding below is the first appellate deci-

sion construing present Treasury Regulations, which

not only define the principle of an arm’s length trans-

action but also deal specifically with interest-free

loans and other intercompany. transactions.’ In con-

* Midtown clearly had gross income during the years in

question, but it operated at a net loss for two of those three

years. (R. 37; Exs. 35-AlI, 36-AJ, 37-AK.) The correlative

adjustment thus will be reflected by increased net operating

loss carryovers, which: will be available to offset Midtown’s

income in future years. The Commissioner does not limit appli-

cation of Section 482 to situations where commonly controlled

taxpayers all show pre-tax profits for the obvious reason that

loss corporations, like preferentially taxed foreign corpora-

tions or domestic life insurance companies, present clear op-

portunities for shifting of otherwise taxable profits.

7 Regulations Section 1.482-1(d) (dealing with methods of

allocation) and Section 1.482-2 (setting forth allocation pro-

cedures for specific situations, such as loans or advances)

were initially proposed on April 1, 1965 (30 Fed. Reg., Part

4, 4256), reproposed and amplified on August 2, 1966 (31

Fed. Reg., Part 8, 10394) and formally adopted, except for one

section, on April 15, 1968 (T.D. 6952, 33 Fed. Reg., Part, 4,

5848). Generally, the Regulations apply to all open years.

T.LR. 836, 1966 C.C.H. Stand. Fed. Tax. Rep., par. 6679.

These Regulations were promulgated as a result of a Con-

gressional directive to the Treasury to “explore the possibility

of developing and promulgating regulations under * * * [the

18

trast, the decision in Tennessee-Arkansas Gravel, ar-

rived at over 30 years ago, antedated judicial :de-

.velopment of the arm’s length standard. Admittedly,

if the Sixth Circuit’s holding is taken to mean that

~ no allocation of income can be made with respect to

any transaction in which the related’ parties have

not provided for income realization, or that no allo-

_ cation is proper until income is realized from outside

the controlled group, it conflicts with the principle .

advanced below. But the rationale used by the court -

in 1940 is far from clear, and the decision—which

does not even advert to the arm’s length standard— ©

can hardly be taken today as an authoritative ruling

by the Sixth Circuit which restricts the scope of the

Commissioner’s allocation powers under Section 482.

Moreover, the asserted conflict is by no means a

square one, since in Tennessee-Arkansas Gravel the

Commissioner had increased the taxpayer’s’ income |

without giving a corresponding deduction to the cor-

poration from which the allocation was made. Since

income had indeed been created, the court properly

upset the allocation, but at the same time suggested

(112 F. 2d at 510) that the Commissioner might—as

he has done here—use the predecessor of Section 482

to reallocate some of the’ reported gross income from

authority contained in Section 482] which would provide

additional guidelines and formulas for the allocation of in-

come and deductions in cases involving foreign income” (H.

Conf. Rep. No. 2508, 87th Cong., 2d Sess., p. 19), and they

apply equally to shifting of profits between domestic trades *

or businesses. ,

ty

14 ©

one of the related taxpayers to the other. For this

reason, thé Commissioner has concurred in’ the re-

sult reached in Tennessee-Arkansas Gravel to the .ex-

tent that the holding is based on his failure to have

made a correlative adjustment. See Rev. Rul. 67-79,

1967-1 Cum. Bull. 117.° |

4. As petitioners suggest (Pet. 7-10, 18), there

are a number of pending cases in various stages of

litigation dealing with aspects of the Commissioner’s

*It is true that several Tax Court decisions cited by peti-

tioners (Pet. 13-17) have extended the holding in Tennessee-

Arkansas Gravel. We disagreé with those decisions but even

they are not in square conflict with the holding below. In

Smith-Bridgman & Co. v. Commissioner, 16 T.C. 287, acq.

1951-1 Cum. Bull. 3 (acquiescence explained in Rev. Rul. 67-~

79, 1967-1 Cum. Bull. 117), the court observed that it was

“apparent” that the Commissioner did not allocate gross

income to the taxpayer, “since the record shows that he mage

no adjustment to the income or deductions” of the taxpayer’s

affiliate. 16 T.C., p. 294. Although the correlative adjustment

problem was not present in PPG’ Industries v. Commissioner,

55 T.C. 928, .the rejection of the interest allocation there

apparently rested on the fact that the loans in question had

been made many years prior to the year of allocation. Limiting

its decision to the “circumstances of this case,” the court

- stated (55 T.C., p. 1009) “We need not decide whether * * *

[the Commissioner] may, under the authority of section 482,

make an allocation of income which is indistinguishable from

the imputation of an interest charge.” Huber Homes v. Com-

missioner, 55 T.C. 598, does purport to hold that Section 482

allocations must: be based on. specific income realized from

dealings with third parties. But, as in PPG Industries, the

Tax Court limited its decision to the facts of the case and

refrained from passing upon the validity of the Regulations

appgoved by the court below. At all events, any conflict in

principle between these Tax Court cases and the decision

below does not warrant review by this Court.

15

a

allocation powers under Section 482. The issues pre-

‘sented here, although important, are but two of a

broad range of legal and factual] questions, some of

which may ultimately have to be resolved by this

Court. At this time, however, there is no conflict in

' principle on the control issue, and, since the adop-

tion of the applicable Treasury Regulations, the court

below is the only appellate court that has considered

the allocation issue here involved. In these circum-

stances, plenary consideration by this Court would

best await further developments in the courts of ap-

peals and a conflict of decisions if one should ulti-

_- Mately occur.

CONCLUSION

| The petition for a writ of certiorari should be

‘denied. "

Respectfully submitted.

ERWIN N. GRISWOLD,

Solicitor General.

Scorr P. CRAMPTON, ~

Assistant Attorney General.

THOMAS L. STAPLETON,

STEPHEN SCHWARZ,

Attorneys.

May 1972.

W ou s. coveenmenr printing orrice; 1972 466757 773

”