Unionbancal Corp. v. Commissioner

Opinion by Judge KLEINFELD; Dissent by Judge THOMAS.

This is a tax case regarding availability of a loss deduction to a company whose predecessor-in-interest left, a “controlled group.”

FACTS

The facts are undisputed, because the parties stipulated to them before the Tax Court, but the details are complex. Here is a simplified summary. The Appellant, UnionBanCal, is the successor-in-interest of an American bank that once belonged to a group of affiliated British and American companies, considered a “controlled group” 2 under federal tax law. While a part of this controlled group, the predecessor sold a loan portfolio at a loss to a *978 British company in the group, Standard Chartered Bank. A statute barred the predecessor from deducting its loss at that time, because Standard was a member of the controlled group. 3 When the predecessor left the group, the statute still wouldn’t let it deduct the loss because Standard still owned the loans and was still in the group; instead, the loss was “deferred.” 4 Standard later sold the loans to a party outside of the group, and at that time, the statute provided that the deferred loss could be restored. But the statute wouldn’t let the…

dissenting:

Although the majority’s analysis is thoughtful and insightful, I conclude that the plain words of the governing statute and the final agency regulation interpreting it are at odds with the temporary regulation upon which the Commissioner relied in denying the deductions in this case. Therefore, I must respectfully dissent.

Our review of an administrative agency’s construction of the statute it administers is governed by Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45 , 104 S.Ct. 2778 , 81 L.Ed.2d 694 (1984), as explained in Food and Drug Administration v. Brown & Williamson Tobacco Corp., 529 U.S. 120 , 120 S.Ct. 1291 , 146 L.Ed.2d 121 (2000).

Under Chevron, we must consider first “whether Congress has directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842 , 104 S.Ct. 2778 . “If Congress has done so, the inquiry is at an end; the court ‘must give effect to the unambiguously expressed intent of Congress.’ ” Brown & Williamson, 529 U.S. at 132 , 120 S.Ct. 1291 (quoting Chevron, 467 U.S. at 843 , 104 S.Ct. 2778 ).

In making that assessment, we look not only at the statutory section in question, but analyze…