operating assets of a former subsidiary, immediately after receiving those assets in a section 332 liquidation of the subsidiary, qualifies as "a genuine contraction of the *** [parent corporation's] business" for purposes of section 1.3461(a)(2), Income Tax Regs., we fail to see any basis for not applying the same rationale to the parent's sale of the liquidated subsidiary's assets, so that the sale is treated as a sale of assets used in the parent corporation's business for purposes of section 1.954-2(e)(3)(ii) through (iv), Income Tax Regs.

In Rauenhorst v. Commissioner, 119 T.C. 157 (2002), we refused "to allow *** [IRS] counsel to argue the legal principles of * * * opinions against the principles and public guidance articulated in the Commissioner's currently outstanding revenue rulings." Id. at 170-171. Consistent with our holding in Rauenhorst, we refuse to allow respondent to argue the legal principles of Acro Manufacturing Co. v. Commissioner, 39 T.C. 377 (1962), against the principles subsequently articulated in Rev. Rul. 75-223, 1975-2 C.B. 109, Rev. Rul. 77-376, 1977-2 C.B. 107, and G.C.M. 37,054 (Mar. 21, 1977). We therefore consider respondent to have conceded that, as a direct result of a section 332 liquidation of an operating subsidiary, the surviving parent corporation is considered as having been engaged in the liquidated subsidiary's preliquidation trade or business, with the result that the assets of that trade or business are deemed assets used in the surviving parent's trade or business at the time of receipt. See Rauenhorst v. Commissioner, supra at 170– 171, 173. As stated by respondent on brief, pursuant to section 301.7701-3(g)(1)(ii) and (2)(i), Proced. & Admin. Regs., "there is no difference between a check-the-box liquidation and an actual liquidation." Therefore, notwithstanding our holding in Acro Manufacturing Co. v. Commissioner, supra, we conclude that respondent has conceded that Dover UK's deemed sale of the H&C assets immediately after the checkthe-box liquidation of H&C constituted a sale of property used in Dover UK's business within the meaning of section. 1.954-2(e)(3)(ii) through (iv), Income Tax Regs. 18 That result

17 We need not revisit our decision in that case at this time.

18 Because H&C's use of its assets was entirely business related, that use almost certainly covered more than one-half of the various periods that, taking into account sec. 1223(2), Dover UK is deemed to have held those assets. Therefore, that use is deemed to be the use for which those

is consistent with the conclusion of the Court of Appeals for the Second Circuit in Williams v. McGowan, 152 F.2d 570 (2d Cir. 1945), that depreciable property and inventory that had been part of a business sold shortly after the partnership conducting the business was terminated retain their status as noncapital assets in the hands of the individual seller.

Respondent's acknowledgment that the business history and activities of a subsidiary carry over to its parent in connection with a section 332 liquidation of the subsidiary is also reflected in section 301.7701-2(a), Proced. & Admin. Regs., which provides that "if the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner”. In the context of a business organization, a “branch" is defined as a "division of a business", and a “division” as an "area of *** corporate activity organized as an administrative or functional unit." American Heritage Dictionary (4th ed. 2000); see also Black's Law Dictionary 188, 479 (6th ed. 1990) (defining a "branch", in relevant part, as a "[d]ivision, office, or other unit of business located at a different location from main office or headquarters", and a "division" as an "[o]perating or administrative unit of *** business"). Thus, the plainly understood import of the cited regulation's use of the terms “branch" and "division" to describe the impact of the deemed section 332 liquidation resulting from a disregarded entity election with respect to an operating subsidiary (particularly in light of respondent's ruling position, as set forth supra) is that the activities of the business operation indirectly owned by the parent through its former subsidiary become the activities of a functional or operating business unit directly owned and conducted by the parent.19 It follows from the language of the regulation that the assets used in the business of the (deemed) liquidated subsidiary retain their status as assets used in the same business by the (deemed) branch or division of the parent.

assets were held for purposes of sec. 1.954-2(a)(3), Income Tax Regs.

19 Sec. 301.7701-2(a), Proced. & Admin. Regs., does not specify a minimum period of time after which a disregarded entity election results in branch or division status for the disregarded entity. Rather, the disregarded entity is deemed a branch or division of the owner upon the effective date of the election, a point that is conceded by respondent on brief. Nor do the checkthe-box regulations require that the taxpayer have a business purpose for such an election or, indeed, for any election under those regulations. Such elections are specifically authorized "for federal tax purposes". Sec. 301.7701-3(a), Proced. & Admin. Regs.

We interpret our statement in Acro Manufacturing Co. v. Commissioner, 39 T.C. at 386, that the taxpayer "neither acquired nor used the Button assets in its business" as tantamount to a statement that the Button business never became an operating branch or division of the taxpayer. Therefore, the Secretary and the Commissioner, in effect, rejected our position in that case by issuing section 301.7701-2(a), Proced. & Admin. Regs., as well as Rev. Rul. 75-223, Rev. Rul. 77-376, and G.C.M. 37,054.20

Finally, we note that, consistent with his admonition in the preamble to the final check-the-box regulations, T.D. 8697, 1997-1 C.B. at 216, that "Treasury and the IRS will continue to monitor carefully the uses of partnerships [and, by extension, disregarded entities] in the international context and will take appropriate action when *** [such entities] are used to achieve results that are inconsistent with the policies and rules of particular Code provisions", respondent was, of course, free to amend his regulations to require a minimum period of continuous operation of a foreign disregarded entity's business, prior to the disposition of that business, as a condition precedent to treating the owner as having been engaged in the trade or business for purposes of characterizing the gain or loss. But, in the absence of respondent's exercise of that authority, we must apply the regulation as written. See Exxon Corp. v. United States, 88 F.3d 968, 974-975 (Fed. Cir. 1996); Woods Inv. Co. v. Commissioner, 85 T.C. 274, 282 (1985); Henry C. Beck Builders, Inc. v. Commissioner, 41 T.C. 616, 628 (1964). As we observed in sustaining the application of a provision of the consolidated return regulations, the fact that the regulation gives rise to a perceived abuse is "problem of respondent's own making”, a problem that respondent has allowed to persist by choosing "not to amend the regulations to correct the problem." CSI Hydro

20 Because of Rev. Rul. 75-223, 1975-2 C.B. 109, and its progeny, petitioner's interpretation of sec. 301.7701-2(a), Proced. & Admin. Regs., as requiring the post-(deemed) liquidation business activities of H&C to be considered business activities of Dover UK immediately following the deemed liquidation of H&C is certainly a plausible interpretation of that regulation. As we stated in Corn Belt Hatcheries of Ark., Inc. v. Commissioner, 52 T.C. 636, 639 (1969), in sustaining the taxpayer's plausible interpretation of an ambiguous ruling, "[t]axpayers are already burdened with an incredibly long and complicated tax law. We see no reason to add to this burden by requiring them anticipatorily to interpret ambiguities in respondent's rulings to conform to his subsequent clarifications".

static Testers, Inc. v. Commissioner, 103 T.C. 398, 411 (1994), affd. 62 F.3d 136 (5th Cir. 1995).21

VI. Validity of Section 1.954-2(e)(3), Income Tax Regs.

Because we find that Dover UK's deemed sale of the H&C assets constituted a sale of assets used in Dover UK's business within the meaning of section 1.954–2(e)(3)(ii) through (iv), Income Tax Regs., we do not address petitioner's argument that section 1.954-2(e)(3), Income Tax Regs., is invalid. VII. Conclusion

Dover UK's gain on the deemed sale of the H&C assets does not constitute FPHCI to petitioner pursuant to section 954(c)(1)(B)(iii).

Decision will be entered under Rule 155.

OREN L. BENTON, PETITIONER v. COMMISSIONER OF
INTERNAL REVENUE, RESPONDENT

Docket No. 7602-02.

Filed May 12, 2004.

P's ch. 11 bankruptcy commenced in 1995, and he was discharged upon the confirmation of his plan of reorganization during 1997. Effectively, at the time of confirmation, all of the estate's assets were transferred to a liquidating trust for the benefit of creditors. P had net operating losses (NOLs) that arose in years prior to the bankruptcy commencement. P's bankruptcy estate also incurred tax losses. The bankruptcy estate succeeded to P's precommencement NOLS. Under sec. 1398(i), I.R.C., P would succeed to the tax attributes (NOLs)

21 Respondent did include an allegedly corrective amendment as part of proposed regulations issued on Nov. 29, 1999. See REG-110385–99, 64 Fed. Reg. 66591 (Nov. 29, 1999). The proposed regulations contained a special rule for foreign disregarded entities used in a so-called extraordinary transaction, one of which constitutes the sale of a 10-percent or greater interest in such an entity within 12 months of the entity's change in classification from association taxable as a corporation to disregarded entity. Under those circumstances, the proposed regulations provided that the disregarded entity "will instead be classified as an association taxable as a corporation". Sec. 301.7701-(h)(1), Proposed Proced. & Admin. Regs., 64 Fed. Reg. 66594 (Nov. 29, 1999). (We assume that the consequence of that approach would be that a CFC's sale of the stock of the disregarded entity would be treated as a sale of property described in sec. 954(c)(1)(B)(i), rather than as a sale of property described in sec. 954(c)(1)(B)(iii), which is respondent's approach in this case, under the existing regulations.) After receiving a number of unfavorable comments, respondent, on June 26, 2003, issued Notice 2003-46, 2003–28 I.R.B. 53, announcing his intention to withdraw the so-called extraordinary transaction rule of the proposed regulations. Formal withdrawal of that portion of the proposed regulations occurred on Oct. 22, 2003. See REG-1110385-9, 68 Fed. Reg. 60305 (Oct. 22, 2003).

of the bankruptcy estate, upon its termination. P contends
that his ch. 11 bankruptcy terminated upon the confirmation
of the plan and the discharge of the debtor. R contends that
a ch. 11 bankruptcy does not terminate until closed by a final
order of a bankruptcy court. P seeks to apply NOLS to his
1995, 1996, and 1997 income which was not includable in the
bankruptcy estate. R contends that P may not carry NOLS to
any years prior to the termination of P's bankruptcy estate;
i.e., 1996 or 1995.

1. Held, the "termination" of P's ch. 11 bankruptcy, for pur-
poses of sec. 1398, I.R.C., occurred upon the confirmation of
the plan and discharge of the debtor.

2. Held, further, P may use NOLS with respect to his separate tax reporting in the year of the commencement of his bankruptcy and later years, to the extent allowed under sec. 172, I.R.C., and the regulations thereunder.

Oren L. Benton, pro se.

Frederick J. Lockhart, Jr., and John A. Weeda, for respond

ent.

OPINION

GERBER, Judge: Respondent determined deficiencies in petitioner's Federal income taxes, an addition to tax, and penalties for the short taxable year of February 23 through December 31, 1995, and the taxable years 1996 and 1997, as follows:

1 Pursuant to sec. 1398(d)(2)(D), petitioner elected to terminate his taxable year as of the bankruptcy commencement date, Feb. 23, 1995. The deficiency is with respect to the short tax year of Feb. 23 through Dec. 31, 1995.

This matter is before the Court on respondent's motion for partial summary judgment. See Rule 121.1 The issues presented for our consideration are: (1) Whether petitioner succeeded to the tax attributes of his chapter 11 bankruptcy

1 Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code in effect for the taxable years at issue.