Transfer of Section 38 Assets to Non-Affiliated Corporation Doesn't Trigger ITC Recapture

                       UNITED STATES TAX COURT

                                      Addition to Tax

BACKGROUND

[2] This case was submitted fully stipulated under Rule 122. The stipulation of facts and the accompanying exhibits are incorporated herein by this reference and found accordingly.

[3] Petitioner, an accrual basis taxpayer, had its principal offices in Maumee, Ohio, at the time it filed its petition herein. Petitioner changed its name to Trinova from the Libbey-Owens-Ford Company (LOF) on July 31, 1986. Petitioner timely filed a consolidated Federal income tax return with certain of its subsidiaries for the years at issue with the Internal Revenue Service Center, Cincinnati, Ohio, or the Internal Revenue Service office in Toledo, Ohio. Petitioner was engaged in the fluid power and plastics businesses, and in the manufacture of glass. The glass business was referred to as the "LOF Glass Division".

[4] One of LOF's largest shareholders was Pilkington Brothers (Pilkington), an English company, which owned 29 percent of petitioner's common stock through its wholly owned U.S. subsidiary, Pilkington Holdings, Inc. (Pilkington Holdings). Two of petitioner's fourteen directors were associated with Pilkington. In late 1985, Pilkington approached LOF and began negotiations concerning the possibility of acquiring the glass business.

[5] Earlier that year, on July 25, 1985, the board of directors of LOF approved the transfer of the glass business to a wholly owned subsidiary for valid business reasons. On February 19, 1986, LOF Glass, Inc. was incorporated as a wholly owned subsidiary of LOF. On March 6, 1986, a "Transfer and Assumption Agreement", amended on April 25, 1986, transferred to LOF Glass, Inc., all assets associated with the LOF Glass Division, including inventories and receivables, effective retroactively to February 19, 1986. These assets also included section 38 assets upon which LOF had previously claimed ITCs. Petitioner took no formal action contemplating the liquidation of LOF Glass, Inc., in the event that the acquisition by Pilkington did not take place.

[6] On March 7, 1986, LOF, Pilkington, and Pilkington Holdings entered into an agreement, amended on April 28, 1986, whereby LOF would transfer all of its shares of LOF Glass, Inc., to Pilkington Holdings in exchange for all of the shares of petitioner held by Pilkington Holdings. On April 28, 1986, Pilkington Holdings exchanged 4,064,550 shares of LOF for the shares of LOF Glass, Inc. LOF Glass, Inc., continued to operate the glass business as a subsidiary of Pilkington Holdings and used the section 38 assets in its trade or business.

[7] The parties have stipulated that petitioner recognized no gain or loss upon the transaction whereby its glass business was transferred to LOF Glass, Inc., pursuant to the provisions of section 351 or sections 354, 355, and 368(a)(1)(D) (except as required by such sections or section 357(c)), and that pursuant to section 355 neither petitioner nor Pilkington Holdings recognized any gain or loss upon the exchange of LOF Glass, Inc., shares for the LOF shares.

[8] Before February 19, 1986, income, deductions, and credits with respect to the LOF Glass Division were included in petitioner's return. From February 19, 1986, through April 28, 1986, deductions and credits with respect to LOF Glass, Inc. (the subsidiary), were included as part of petitioner's consolidated return. After April 28, 1986, LOF Glass, Inc., was no longer part of petitioner, petitioner's affiliated group, or petitioner's consolidated Federal income tax return.

[9] On its 1986 consolidated return, petitioner did not include any amount of ITC recapture with respect to the LOF Glass, Inc., section 38 assets. Respondent determined that a $5,718,749 ITC recapture arose from the April 1986 transaction. Petitioner does not dispute the amount of the ITC recapture, should the Court hold petitioner liable for it.

DISCUSSION

[10] The investment tax credit provisions, now repealed but in effect in respect of the taxable year 1986, provided for a tax credit to taxpayers purchasing certain types of property for use in their businesses. Whether petitioner is required to recapture its investment tax credit turns upon the impact of a revenue ruling on what other otherwise appears to be unqualified language of a consolidated return regulation. The issue is not new to this Court whose position has been rejected by two Courts of Appeals. By way of background to our resolution of this judicial conflict, we first turn to a description of the provisions in respect of the investment tax credit pertinent to our analysis.

[11] Section 47(a)(1) provided for recapture of the investment tax credit:

     If during any taxable year any property is disposed of, or

[13] However, the transactions herein took place in the consolidated return context, which provides a different frame of reference. Paragraph (f) of section 1.1502-3, Income Tax Regs., deals with early dispositions of section 38 assets of a member of a consolidated group; subparagraph (2) of paragraph (f) provides:

          (2) * * * a transfer of section 38 property from one member

[15] It is equally clear from EXAMPLE (3) of the regulations that a transfer of the section 38 ASSETS by LOF Glass, Inc., to Pilkington Holdings would have triggered the recapture of the investment tax credit. In the same vein, the language of EXAMPLE (5) without more would dictate that the transfer of the stock of LOF Glass, Inc., to Pilkington Holdings would NOT trigger the recapture of such credit. In point of fact, the application of EXAMPLE (5) to the instant case is affected by a revenue ruling and the opinions of two Courts of Appeals approving that ruling. In order to facilitate an understanding of the positions of the parties and our views in respect thereto, we shall first discuss the ruling and the two Courts of Appeals opinions.

[16] In Rev. Rul. 82-20, 1982-1 C.B. 6, section 38 assets were, pursuant to a prearranged plan, transferred by the parent corporation to a subsidiary within a consolidated group in exchange for stock of the subsidiary. Immediately thereafter, the stock of the subsidiary was distributed to one of the two shareholders in exchange for his stock in the parent. It was assumed that the subsidiary would continue to use the section 38 assets in the same trade or business. Although the ruling recognized that the transactions qualified under sections 355(c)(1) and 368(a)(1)(D), it held that the ITC recapture provision of section 47(a)(1) applied on the ground that there was a PLANNED TRANSFER OF THE PROPERTY outside the group. Without making any reference to EXAMPLE (5), the ruling reasons:

     Although section 1.1502-3(f)(2)(i) of the regulations creates an

          Although the example (5) stock sale occurs in the year

[18] The next development in the scenario involved herein is the decision of the Court of Appeals for the Second Circuit in Salomon, Inc. v. United States, 976 F.2d 837 (2d Cir. 1992). A factual situation substantially similar to that involved herein and in Walt Disney Inc. v. Commissioner, supra, confronted the Court of Appeals in Salomon. In deciding the case in favor of the Government, the Court of Appeals for the Second Circuit declared that the fact that, in Example (5), "the asset transfer occurs in one year (1968) and the spinoff in the next year (1969)", Salomon, Inc. v. United States, supra at 842, constituted a significant difference from the situation dealt with in Rev. Rul. 82-20, supra, and the Court of Appeals concluded:

     The Revenue Ruling thus complements CRR Example 5 by dealing

[20] The final development in the scenario is the reversal of our decision in Walt Disney Inc. v. Commissioner, supra, by the Court of Appeals for the Ninth Circuit. Relying heavily upon Salomon, Inc. v. United States, supra, the Court of Appeals for the Ninth Circuit also concluded that Rev. Rul. 82-20, supra, and Example (5) were consistent and agreed with the Court of Appeals for the Second Circuit, with the further comment that Rev. Rul. 82-20 qualified as "other law" under section 1.1502-80, Income Tax Regs. Walt Disney Inc. v. Commissioner, 4 F.3d at 741 n.10. The Court of Appeals for the Ninth Circuit made no reference to the step transaction doctrine.

[21] Against the foregoing background, we proceed to consider the positions of the parties. Relying on the position we took in Walt Disney Inc. v. Commissioner, supra, petitioner contends that the regulations, section 1.1502-3(f)(2) and (3), and Example (5) in particular, Income Tax Regs., are dispositive and that the step transaction doctrine has no application herein. Respondent, relying on Rev. Rul. 82-20, supra, and the status accorded it by the Courts of Appeals for the Second and Ninth Circuits in Salomon, Inc. v. United States, supra, and Walt Disney Inc. v. Commissioner, supra, argues in effect that Rev. Rul. 82-20, supra, operates independently of Example (5) and should control and that, in any event, the application of the step transaction doctrine should result in the recapture by petitioner of the investment tax credit. We agree with petitioner.

[22] With all due respect, we disagree with both the result and the reasoning of the Courts of Appeals and adhere to the position we took in Walt Disney Inc. v. Commissioner, 97 T.C. 221 (1991). We think that the fact that the transfer of the assets and the transfer of the stock occurred in the same, rather than different, taxable years does not provide a meaningful basis for distinguishing Rev. Rul. 82-20, supra, from Example (5) of the regulations. Indeed, as we have already pointed out, see supra pp. 9-10, we specifically refused to give weight to this element in Walt Disney Inc. v. Commissioner, supra. Our continued adherence to this point of view is reinforced by the fact that the time span element is also present in Example (3) where the section 38 assets are transferred in a different taxable year and the recapture of the investment tax credit is mandated. The contrast between these two examples highlights the fact that it is WHAT is transferred and not WHEN the transfer occurs that is significant. Indeed, if timing was a significant element in Example (5), one would think that respondent would have referred to Example (5) and this element in Rev. Rul. 82-20, supra, and thus provided the tax-paying public with notice of respondent's restrictive interpretation of Example (5) rather than leaving such interpretation to unarticulated alleged inference. We do not think the "assumption" referred to in the ruling, see supra p. 9, constitutes a meaningful signal to this effect.

[23] In the foregoing context, the conflict between Rev. Rul. 82-20, supra, and Example (5) becomes apparent. The question then becomes what, if any, weight we should give to Rev. Rul. 82-20, supra. We think the Courts of Appeals for the Second and Ninth Circuits accorded the ruling undue weight and that revenue rulings play a lesser role than the language of the opinions of those Courts of Appeals seems to indicate. We see no purpose to be served in engaging in a detailed discussion of the differences in judicial articulation which can be found in this arena. We note, however, that the Court of Appeals for the Sixth Circuit, to which an appeal herein will lie, has stated:

     A Revenue Ruling, however, is not entitled to the deference

[25] Our approach herein obviously also reflects our disagreement with that of the Courts of Appeals for the Second and Ninth Circuits in according Rev. Rul. 82-20, supra, the status of "other law" in order to apply section 1.1502-80, Income Tax Regs. See supra p. 11. See Norfolk S. Corp. v. Commissioner, 104 T.C. 13, 45-46 (1995) (revenue rulings "do not have the force of law"), supplemented by 104 T.C. 417 (1995).

[26] Finally, we turn to respondent's attempt to salvage her position by arguing that the step transaction doctrine constitutes "other law" within the meaning of section 1.1502-80(a), Income Tax Regs., which provides:

     The Internal Revenue Code, or other law, shall be applicable to

[27] In sum, we hold for petitioner on the issue of the recapture of the investment tax credit. Such being the case, there is no addition to tax under section 6661. We again point out that this opinion resolves only the investment tax credit recapture issue and that an additional issue relating to the allocation of deductions is still before the Court. See supra note 2.

[28] Reviewed by the Court.

[29] COHEN, CHABOT, GERBER, PARR, WHALEN, COLVIN, CHIECHI, LARO, FOLEY, and GALE, JJ., agree with this majority opinion.

[30] HALPERN, J., did not participate in the consideration of this opinion.

DISSENT OF JUDGE SWIFT

[31] SWIFT, J., respectfully dissenting: With the benefit of the analyses provided in the opinions of the Second and Ninth Circuit Courts of Appeals in Salomon, Inc. v. United States, 976 F.2d 837 (2d Cir. 1992), and Walt Disney, Inc. v. Commissioner, 4 F.3d 735 (9th Cir. 1993), we should recognize the error made in our opinion in Walt Disney, Inc. v. Commissioner, 97 T.C. 221 (1991), and sustain respondent's position in this case.

[32] The majority suggests that the issue herein turns primarily on whether a particular provision of the consolidated return regulations (namely, sec. 1.1502-3(f)(3), Example (5), Income Tax Regs.) controls over a revenue 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.

[33] 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 the Second nor the Ninth Circuit rely exclusively on the conclusive effect of the revenue ruling. Rather, both rely heavily on "economic reality" and the "substance-over-form" doctrines, which are simply broader labels for, and which encompass, the step transaction doctrine.

[34] The Court of Appeals for the Second Circuit in Salomon, Inc. v. United States, supra at 842-843, explained as follows:

     In substance, if not in form, the direct and the circuitous

     "in substance, if not in form, the direct and the circuitous

[37] The above regulations under section 1.47-3(f)(1), (2) (6), should be read together with section 1.1502-3(f)(3), Income Tax Regs. Where a change in ownership of an affiliated transferee company is contemplated at the time of a transfer of section 38 property and where the change in ownership that occurs is, in substance, in economic reality, and/or under the step transaction doctrine, integral to the transfer of the property outside the affiliated group, the transfer should be treated, to the extent of the change in ownership of the transferee corporation, as a taxable disposition under section 47.

[38] The weight to be given a revenue ruling is not the issue in this case. Rather, the issue is the validity of the underlying rationale of Rev. Rul. 82-20, 1982-1 C.B. 6, -- namely, whether the transaction before us and its taxability under section 47 is controlled by the substance thereof. As is explained in the cited ruling:

     When there is no intention at the time of transfer to keep the

     To treat * * * [the taxpayer] as having relinquished during the

[41] Both the Second and the Ninth Circuit Courts of Appeals in the above-cited opinions applied the substance-over-form doctrine in spite of the presence of a business purpose for each step of the reorganizations involved in those cases and, as stated above, concluded that the substance thereof, for purposes of section 47, constituted dispositions of property outside the consolidated group, thus triggering recapture under section 47. See also the District Court's opinion in Salomon v. United States, 92-1 USTC par. 50,155, 70 AFTR 2d par. 92-5872 (S.D.N.Y. 1992).

[42] In King Enters., Inc. v. United States, 189 Ct. Cl. 466, 418 F.2d 511, 516 n.6 (1969), the Court of Claims explained that various courts have --

     enunciated a variety of doctrines, such as step transaction,

     Most cases applying the step transaction doctrine, far from

     After identifying a business purpose, the * * * [Tax Court in

     Our path to decision is framed within two cardinal principles,

[47] Based on the above authority, I believe that the majority herein errs in suggesting, majority op. p. 16, that the business purpose associated with the transfer of petitioner's glass division to a subsidiary and with the change in ownership of the subsidiary provides, for purposes of section 47 recapture, the sum and substance of the transaction before us and effectively precludes any meaningful analysis under the substance-over-form, the step transaction, or the integrated transaction doctrines.

[48] A brief analysis of the substance and steps of the transactions before us is appropriate.

[49] The Court of Appeals for the Sixth Circuit, to which an appeal in this case would lie, has adopted the end result approach of the step transaction doctrine. In Brown v. United States, 868 F.2d 859, 862-863 (6th Cir. 1989), the Court of Appeals for the Sixth Circuit stated as follows --

     the essence of the step transaction doctrine is that an

[51] Late in 1985, representatives of Pilkington approached LOF concerning acquisition of LOF's glass division. During November of 1985 through early March of 1986, negotiations regarding the possible acquisition took place.

[52] On March 6, 1986, LOF transferred the glass division to LOF Glass, the new subsidiary that had been formed for that purpose. One day later, on March 7, 1986, LOF entered into a 45-page agreement to transfer to Pilkington Holdings all of its stock interest in LOF Glass in exchange for Pilkington Holdings' stock interest in LOF.

[53] The March 7, 1986, agreement to exchange stock expressly refers to the March 6, 1986, transfer of the glass division to LOF Glass and establishes the integrated nature of these transactions.

[54] Seven weeks later, on April 28, 1986, the exchange of stock that had been agreed to on March 7, 1986, was consummated.

[55] After April 28, 1986, LOF Glass was no longer part of LOF's affiliated group and no longer was included in LOF's consolidated Federal income tax return.

[56] It is apparent that the transfer of the glass division to LOF Glass and the agreement one day later to transfer the stock of LOF Glass outside the LOF affiliated group constituted an integrated transaction intended to move the glass division (and the related section 38 property) outside of LOF's affiliated group.

[57] Based on this stipulated factual record and on this issue on which petitioner has the burden of proof (see Rule 142(a)), only one conclusion can be reasonably reached -- namely, that in spite of the qualification of the transaction as a reorganization under section 368(a)(1)(D) (allowing LOF to avoid recognizing taxable gain or loss on the transfer of the glass business and allowing LOF and Pilkington Holdings to avoid recognizing taxable gain or loss on their exchange of stock), the substance of the integrated transaction by which LOF's glass division in 1986 was transferred outside the LOF affiliated group constituted a disposition of property under section 47 and triggered recapture of investment tax credit on any section 38 property that was included with the property transferred.

[58] Section 1.1502-3(f)(3), EXAMPLE (5), Income Tax Regs., simply is not applicable. That example involved, in year 1, only a transfer of property within the affiliated group. After the transfer, the property stayed within the affiliated group and was included in the consolidated return for the remainder of year 1. In year 2, no further transfer of property occurred. Rather, in an apparently unrelated transaction, a third party purchased the stock of the transferee, and the transferee, which had received the property in year 1, left the affiliated group. For the first time in year 2, the property will not be included in the consolidated return of the affiliated group.

[59] The transaction described in EXAMPLE (5) of the above regulation bears little resemblance to that involved in this case (where a transfer of property and a change in ownership of the transferee corporation occur effectively within the same taxable year as part and parcel of a single plan and transaction under which the transferee corporation promptly leaves the affiliated group and is no longer part of the affiliated group for purposes of inclusion in the transferor corporation's consolidated tax return). EXAMPLE (5) of the above regulation under the consolidated return regulations should not be read to immunize the integrated transaction before us from recapture under section 47.

[60] It bears noting that the facts of the instant transaction are distinguishable from the facts of Salomon v. Commissioner, 976 F.2d 837 (2d Cir. 1992), and Walt Disney, Inc. v. Commissioner, 4 F.3d 735 (9th Cir. 1993). Although the spin-offs in those cases resulted in a change in the identity of the corporate holder of the section 38 property, that property remained in the same economic family, with the same shareholders holding the stock of the new corporate owner of the section 38 property. In the instant case, at the inception of the transactions, Pilkington held only a 29-percent interest in the stock of LOF. As a result of the completion of the split off, Pilkington acquired a 100-percent interest in the stock of LOF Glass, reflecting a 71-percent shift in the ownership of the corporation owning the section 38 property after the split off.

[61] For the reasons stated herein and in the above opinions of the courts of appeals, I dissent.

[62] JACOBS, WELLS, RUWE, BEGHE, and VASQUEZ, JJ., agree with this dissent.

DISSENT OF JUDGE BEGHE

[63] BEGHE, J., dissenting: Having joined Judge Swift's dissent, I add a few words in an effort to provide some further support and explanation. The case at hand is an appropriate occasion to apply the intent, end result, integrated transaction version of the step-transaction doctrine to support a finding of early disposition that results in ITC recapture.

[64] Petitioner's initial drop-down to LOF Glass of the glass business and its section 38 assets, which occurred on March 6, 1986, was followed 1 day later by the single-spaced, 45-page, March 7, 1986, agreement for the split-off exchange of shares of petitioner for shares of LOF Glass by Pilkington Holdings. The split-off occurred on April 28, 1986, pursuant to that agreement, as amended in immaterial respects. Although the parties stipulated that the drop- down occurred for valid business reasons, reasons that were presumably independent of the impending divestiture, there were no substantial conditions in the March 7, 1986, agreement to consummation of the split-off. ⁴

[65] The majority, uncritically following our opinion in Walt Disney, Inc. v. Commissioner, 97 T.C. 221 (1991), revd. 4 F.3d 735 (9th Cir. 1993), assumes an unwarranted equivalence between the two events described in the section 1502 regulation examples and the LOF Glass divestiture transaction. ⁵ Contrary to the majority's assumption, the unadorned descriptions of the events in the regulation's two examples indicate the lack of connection between the intragroup sale of section 38 assets in year 1 and the sale of the stock of the purchaser to a third party outside the group in year 2. The majority goes on to disregard the obvious connection -- supplied by the intent, manifested contemporaneously with the drop-down to LOF Glass, to accomplish the end result of the split-off -- that binds the steps in the case at hand in an integrated transaction. ⁶

[66] The transactions in the case at hand are not just two unconnected sales. They evidence a flow of events that comprise a two-step divestiture, the second step of which is an exchange of shares under section 368(a)(1)(D) that qualifies for nonrecognition under section 355. The initial drop-down of assets into a subsidiary in exchange for its shares is essential to enable the intended divestiture to be accomplished by a share for share exchange that entitles the second step to nonrecognition of gain to both parties. The connection that binds the two steps, as in J.E. Seagram Corp. v. Commissioner, 104 T.C. 75, 91-99 (1995), is manifested in the plan of reorganization, which embodies the intent to achieve the end result. ⁷ Although the first step in the case at hand has an independent business purpose in the sense that it would not have been fruitless in all events to take that step -- after all, a corporation engaged in more than one business almost invariably has a business purpose for dropping a business into a subsidiary, if only to protect the assets of its other businesses from the liabilities and risks that are encapsulated by the drop-down -- the independent business purpose of the first step in the case at hand is trumped by the more important business purpose of completing the divestiture by means of a tax-free exchange, which relegates the first step to a subordinate implementing role.

[67] The integrated transaction approach is a legitimate "weak" version of the step-transaction doctrine, as contrasted with the "strong" requirements ⁸ that must be satisfied, under its binding commitment and interdependence versions, in order to disregard unnecessary intermediate steps. ⁹ The creation of and drop-down to LOF Glass were necessary to accomplish the divestiture (separating LOF Glass, the new holder of the glass business and its section 38 assets, from the affiliated group), which was the intended end result that followed the initial step. The intention to effect that end result suffices to justify application of the integrated transaction approach to conclude that the section 38 assets left the economic family of petitioner's affiliated group in a way that requires ITC recapture.

[68] JACOBS, J., agrees with this dissent.

² An additional issue, relating to the allocation of deductions between subpart F income and non-subpart F income, will be decided later by a separate opinion.

³ Sec. 47(b)(2) provided an exception for certain types of reorganizations which is not applicable herein (and the parties do not argue otherwise) because the assets transferred to LOF Glass, Inc., did not constitute substantially all of the assets of petitioner. See Baicker v. Commissioner, 93 T.C. 316, 326 (1989).

⁴ Expiration of all Hart-Scott-Rodino waiting periods, receipt of tax opinions that the split-off would be a tax-free exchange under section 355, and satisfaction of all other stated conditions, must have occurred or have been waived between March 6 and April 28, 1986.

⁵ There are at least three significant differences between the facts of the examples in the section 1502 regulation and the facts of our case. In the examples, the sale of the section 38 assets and the sale of the purchaser's stock occur in different tax years, whereas in our case they occur in the same year; the first sale in the examples appears to be made to a preexisting member of the group, whereas in our case the transfer is made to a newly created subsidiary organized to do the deal, including the second step; and the examples concern two unrelated sales, whereas the first transaction in our case is a drop-down of assets that is an integral and necessary step of the plan to accomplish the agreed upon tax-free split-off exchange of shares that is intended to follow.

⁶ Events should be deemed to have a connection for tax purposes when dictated by the logic of events that has to do with cause and effect relationships and necessary connections or outcomes. Under that formulation, there is no connection between the sales in the examples in the sec. 1502 regulation and there is a connection between the drop-down and the split-off in the case at hand.

⁷ Contrary to the views of those who would read the intent, end result, integrated transaction version of the step-transaction doctrine out of the judicial arsenal, see, e.g., Ginsburg & Levin, Mergers, Acquisitions and Buyouts, secs. 208.4.5, 608.1, 608.3.1, 610.9, 1002.1.4 (July 1996); Bowen, The End Result Test, 49 Taxes 722 (1994), there is an appropriate role for this "weak" version of the step-transaction doctrine in situations such as the case at hand.

⁸ The terms "weak" and "strong" are used here in the mathematical sense of "subject to less/more exacting or numerous conditions". See Oxford English Dictionary, Entries under "weak", 19.f(b) and "strong", 19.c (2d ed. 1995). Analogous usages occur in logic, physics, and cosmology. On "weakened" and "strengthened" moods of the syllogism, see Cohen & Nagel, An Introduction to Logic and Scientific Method 84, 86 (1934). On the "strong" force in elementary particle physics, which holds the nucleus together, and the "weak" force, which causes the decay of many of the elementary particles, see, e.g., 28 Encyclopedia Britannica, Subatomic Particles 239-240 (15th ed. 1993). On the "weak" and "strong" anthropic principles regarding the state of the universe, see Hawking, A Brief History of Time 124-126 (1988). See also Penrose, The Emperor's New Mind 17-23 (1989), on "strong" artificial intelligence.

⁹ As in West Coast Mktg. Corp. v. Commissioner, 46 T.C. 32 (1966).