MARVEL ENTERTAINMENT, LLC, AS SUCCESSOR TO MARVEL
ENTERTAINMENT, INC., F.K.A. MARVEL ENTERPRISES, INC.
 AND AS AGENT FOR MEMBERS OF MARVEL ENTERPRISES,
     INC. AND SUBSIDIARIES GROUP, PETITIONER v.
        COMMISSIONER OF INTERNAL REVENUE,
                    RESPONDENT
       Docket No. 12113–13.              Filed July 21, 2015.

     MEG was an affiliated group that filed consolidated
   returns. On Dec. 27, 1996, certain MEG member entities filed
   for bankruptcy under 11 U.S.C. ch. 11 and subsequently
   excluded cancellation of indebtedness (COD) income from
   their respective gross incomes under I.R.C. sec. 108(a)(1)(A)
   for MEG’s short taxable year ending Oct. 1, 1998. Pursuant
   to I.R.C. sec. 108(b)(2)(A), MEG reduced each member entity’s
   allocable share of consolidated net operating loss (CNOL) by
   each member entity’s previously excluded COD income. MEG
   carried forward into its successor affiliated group a
   $47,424,026 CNOL and used this amount to offset income of
   the successor group for its taxable years ending Dec. 31, 2003
   and 2004. R determined deficiencies for 2003 and 2004,
   arguing that I.R.C. sec. 108(b)(2)(A) required MEG’s 1998 tax
   attribute reduction to occur at the consolidated level rather
   than at the individual entity level. P, the successor to MEG

                                                                    69
70           145 UNITED STATES TAX COURT REPORTS                        (69)

      and as agent for the members of the affiliated group, timely
      filed a petition disputing R’s determinations. Held: Where a
      member of a consolidated group has excluded COD income
      during a consolidated return year before the adoption of sec.
      1.1502–28T, Temporary Income Tax Regs., 69 Fed. Reg. 12071
      (Mar. 15, 2004), the NOL subject to reduction pursuant to
      I.R.C. sec. 108(b)(2)(A) is the entire CNOL of the consolidated
      group. See United Dominion Indus., Inc. v. United States, 532
      U.S. 822 (2001).

  Mark J. Silverman, Michael H. Salama, Matthew D.
Lerner, and Andrew F. Gordon, for petitioner.
  Curt M. Rubin, Steven N. Balahtsis, and Lawrence L.
Davidow, for respondent.

                                OPINION

   RUWE, Judge: Respondent determined deficiencies in peti-
tioner’s Federal income tax for its consolidated taxable
return years ending December 31, 2003 and 2004, of
$2,144,756 and $14,453,653, respectively. Petitioner’s defi-
ciencies result from members of its predecessor consolidated
group filing for bankruptcy under 11 U.S.C. chapter 11 and
realizing cancellation of indebtedness (COD) income for the
consolidated group’s short taxable year ending October 1,
1998. Certain members of the predecessor consolidated group
excluded the COD income from their respective gross
incomes pursuant to section 108(a)(1)(A). 1 When subse-
quently reducing net operating loss (NOL) as required by sec-
tion 108(b)(2)(A), each debtor member of the consolidated
group reduced its allocable share of the group’s consolidated
net operating loss (CNOL) by its previously excluded COD
income.
   This matter is before the Court on the parties’ cross-
motions for summary judgment pursuant to Rule 121. The
parties have asked this Court to decide, as a matter of law,
whether a consolidated group’s NOL subject to reduction
under section 108(b)(2)(A) for its short taxable year ending
October 1, 1998, is (1) the entire CNOL of the consolidated
group or (2) a portion of the CNOL allocable to each member
of the consolidated group. Accordingly, the only issue before
  1 Unless otherwise indicated, all section references are to the Internal

Revenue Code (Code) in effect for all relevant years, and all Rule ref-
erences are to the Tax Court Rules of Practice and Procedure.
(69)          MARVEL ENTM’T, LLC v. COMMISSIONER                       71


the Court is the legal question concerning the NOL subject
to reduction under section 108(b)(2)(A). This is an issue of
first impression in this Court.

                             Background
   At the time the petition was filed, the principal place of
business for Marvel Entertainment, LLC (petitioner), 2 was
in New York, New York.
   On December 27, 1996, Marvel Entertainment Group, Inc.
(MEG), and certain of its operating and inactive subsidi-
aries—Fleer Corp. (Fleer), Skybox International, Inc., Marvel
Characters, Inc., Heroes World Distribution, Inc. (Heroes),
the Asher Candy Co., Malibu Comics Entertainment, Inc.
(Malibu), Frank H. Fleer Corp., and Marvel Direct Mar-
keting, Inc.—filed voluntary petitions for relief under chapter
11 of the Bankruptcy Code with the U.S. Bankruptcy Court
for the District of Delaware. At the time of its bankruptcy
filings, MEG and its subsidiaries filed consolidated Federal
income tax returns as members of a consolidated group of
corporations whose common parent was Mafco Holdings, Inc.
   On April 24, 1997, MEG and its subsidiaries became a
separate affiliated group (MEG Group) and filed consolidated
Federal income tax returns for the short taxable years
ending December 31, 1997, and October 1, 1998.
   On October 1, 1998, MEG Group was acquired by Toy Biz,
Inc. (Toy Biz), pursuant to MEG Group’s fourth amended
plan of reorganization (fourth plan of reorganization). MEG
and its subsidiaries became members of a new consolidated
group of which Toy Biz was the common parent. As part of
the transaction Toy Biz changed its name to Marvel Enter-
prises, Inc. In connection with the fourth plan of reorganiza-
   2 Petitioner is an entertainment company known for its comic book char-

acters. On September 16, 2005, Marvel Enterprises, Inc. (Marvel Enter-
prises), merged with its wholly owned subsidiary Marvel Entertainment,
Inc., with Marvel Enterprises surviving the merger but changing its name
to Marvel Entertainment, Inc. On December 31, 2009, Marvel Entertain-
ment, Inc., was acquired by the Walt Disney Co. (Disney) and was merged
into Maverick Merger Sub, LLC (Maverick), a Delaware limited liability
company wholly owned by Disney. Upon filing the certificate of merger
with the secretary of state for the State of Delaware, Maverick changed
its name to Marvel Entertainment, LLC.
72              145 UNITED STATES TAX COURT REPORTS                                                (69)


tion, four MEG Group members had certain debts eliminated
and realized COD income as follows:
                  Member                                                    COD income

                   MEG ...............................................       $2,497,828
                   Fleer ...............................................    163,680,402
                   Heroes ............................................        4,930,767
                   Malibu ............................................          353,466

                    Total .............................................     171,462,463

MEG, Fleer, Heroes, and Malibu each excluded its COD
income from their respective gross incomes for the short tax-
able year ending October 1, 1998, pursuant to section
108(a)(1)(A).
  Section 108(b)(2)(A) provides that the amount excluded
under section 108(a)(1)(A) shall be applied to reduce tax
attributes starting with any net operating loss for the tax-
able year and any net operating loss carryover to such
taxable year. As of October 1, 1998, MEG Group had a
CNOL of $187,154,680. For purposes of applying section
108(b)(2)(A), MEG Group allocated the CNOL among its
consolidated group members as follows:
                Member                                                     Share of CNOL

                 MEG ...............................................       $71,330,567
                 Fleer ...............................................      82,656,671
                 Heroes ............................................         4,058,504
                 Malibu ............................................         2,707,590

                  Total .............................................      1160,753,332

                1 As of Oct. 1, 1998, MEG Group had a CNOL of
              $187,154,680. The record does not explain where the re-
              maining $26,401,348 was allocated.

  On its consolidated Federal income tax return for the short
taxable year ending October 1, 1998, MEG Group reduced
the share of CNOL separately attributable to each of MEG,
Fleer, Heroes, and Malibu by the lesser of (1) each member’s
excluded COD income or (2) each member’s allocable share of
CNOL, as follows:
                    Allocated              Excluded                 Reduction of      Remaining
                     CNOL                 COD income                  CNOL              CNOL

     MEG          $71,330,567              $2,497,828                $2,497,828      $68,832,739
     Fleer         82,656,671             163,680,402                82,656,671           -0-
     Heroes         4,058,504               4,930,767                 4,058,504           -0-
     Malibu         2,707,590                 353,466                   353,466        2,354,124

      Total       160,753,332             171,462,463                89,566,469       71,186,863
(69)             MARVEL ENTM’T, LLC v. COMMISSIONER                        73


   MEG Group joined the Marvel Group on October 2, 1998,
and carried forward into the Marvel Group its remaining
$97,588,211 3 CNOL (CNOL carryforward). The CNOL
carryforward was subsequently decreased to $96,391,831 on
December 21, 1998, to reflect the dissolution of Fleer.
Respondent examined MEG Group’s consolidated Federal
income tax return for its short taxable year ending October
1, 1998, and made no adjustments to the claimed CNOL
carryforward.
   MEG Group’s CNOL carryforward of $96,391,831 was used
by the Marvel Group in subsequent years to offset income as
follows:
 Taxable year ending   CNOL carryforward   Income offset   Remaining CNOL

       Dec. 31, 1999      $96,391,831         $797,679       $95,594,152
       Dec. 31, 2001       95,594,152       29,862,818        65,731,334
       Dec. 31, 2002       65,731,334       18,307,308        47,424,026

Respondent did not examine the Marvel Group’s consolidated
returns for its taxable years 1999, 2001, and 2002. The
Marvel Group claimed a CNOL carryforward of $47,424,026
into its taxable year ending December 31, 2003.
  On March 28, 2013, respondent mailed to petitioner a
notice of deficiency determining deficiencies for petitioner’s
taxable years 2003 and 2004 of $2,144,756 and $14,453,653,
respectively. In the notice of deficiency respondent challenged
the Marvel Group’s computation of the CNOL carryforward
and took the position that MEG Group should properly have
reduced its $187,154,680 CNOL as of October 1, 1998, by
$171,462,463, the total of excluded COD income for MEG,
Fleer, Heroes, and Malibu. This reduction would have
resulted in a remaining CNOL as of October 2, 1998, and
carried into the Marvel Group subject to the limitations of
section 382, of $15,692,217. Petitioner timely filed a petition
disputing the determinations in the notice of deficiency.

                               Discussion
  Either party may move for summary judgment regarding
all or any part of the legal issues in controversy. See Rule
  3 This amount represents MEG Group’s original $187,154,680 CNOL less

$89,566,469 of total reduction of CNOL as of October 1, 1998. The CNOL
carryforward was limited by sec. 382.
74         145 UNITED STATES TAX COURT REPORTS             (69)


121(a). Summary judgment is intended to expedite litigation
and to avoid unnecessary and expensive trials. Shiosaki v.
Commissioner, 61 T.C. 861, 862 (1974). Summary judgment
is appropriate where the pleadings and other materials show
that there is no genuine dispute as to any material fact and
that a decision may be rendered as a matter of law. Rule
121(a) and (b); Sundstrand Corp. v. Commissioner, 98 T.C.
518, 520 (1992), aff ’d, 17 F.3d 965 (7th Cir. 1994). The bur-
den is on the moving party to demonstrate that no genuine
dispute as to any material fact remains and that it is entitled
to judgment as a matter of law. FPL Grp., Inc. & Subs. v.
Commissioner, 116 T.C. 73, 74–75 (2001). In deciding
whether to grant summary judgment the Court must con-
sider the factual materials and inferences drawn from them
in the light most favorable to the nonmoving party. Bond v.
Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commis-
sioner, 85 T.C. 527, 529 (1985). However, the nonmoving
party is required ‘‘to go beyond the pleadings and by * * *
[its] own affidavits, or by the ‘depositions, answers to inter-
rogatories, and admissions on file,’ designate ‘specific facts
showing that there is a genuine issue for trial.’ ’’ Celotex
Corp. v. Catrett, 477 U.S. 317, 324 (1986); see also
Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002); FPL
Grp., Inc. & Subs. v. Commissioner, 115 T.C. 554, 559 (2000).
Summary judgment is appropriate in the matter sub judice
because the parties agree on all material facts and the only
dispute we must resolve is one of law.
   In MEG Group’s short taxable year ending October 1,
1998, four of its consolidated group members realized total
COD income of $171,462,463 resulting from bankruptcy
filings under chapter 11. Each of the four MEG Group debtor
members excluded the COD income from its respective gross
incomes under section 108(a)(1)(A). MEG Group also had a
$187,154,680 CNOL for its short taxable year ending October
1, 1998. Under section 108(b)(2)(A), MEG Group allocated a
portion of the group’s CNOL to each of the four MEG Group
debtor members and reduced the allocated CNOL shares by
each member’s previously excluded COD income. As a result,
MEG Group reduced its $187,154,680 CNOL by $89,566,469
of the $171,462,463 in excluded COD income.
   The sole issue for decision is whether the NOL subject to
reduction under section 108(b)(2)(A) is the entire CNOL of a
(69)        MARVEL ENTM’T, LLC v. COMMISSIONER               75


consolidated group (single-entity approach) or a portion of a
consolidated group’s CNOL allocable to each group member
(separate-entity approach). Respondent argues that the
‘‘ ‘NOL’ that must be reduced under section 108 is the entire
CNOL’’ of a consolidated group. According to respondent,
‘‘the MEG Group should properly have reduced its
$187,154,680 CNOL as of October 1, 1998 by $171,462,463,
the total of the excluded COD income for each of Fleer,
Heroes, MEG and Malibu resulting in a remaining CNOL as
of October 2, 1998 * * * of $15,692,217.’’ Respondent con-
cludes that this method of tax attribute reduction would have
‘‘result[ed] in $0 of CNOL carryover into the * * * [Marvel
Group] consolidated return taxable years ending December
31, 2003 and December 31, 2004.’’
    Petitioner argues that the NOL subject to reduction under
section 108(b)(2)(A) is limited to the share of a consolidated
group’s CNOL allocable to each member entity. Specifically,
petitioner asserts that ‘‘where a taxpayer that is a member
of a consolidated group excluded COD income from gross
income during a taxable year ended October 1, 1998 pursu-
ant to section 108(a)(1)(A), the ‘net operating loss’ or ‘net
operating loss carryover’ of the taxpayer that was subject to
reduction under section 108(b)(2)(A) was the portion of the
CNOL of the consolidated group attributable to such
member.’’
1. Preliminary Matter
  In the notice of deficiency respondent challenged MEG
Group’s use of the separate-entity approach and took the
position that MEG Group should properly have reduced its
$187,154,680 CNOL for its short taxable year ending October
1, 1998, by $171,462,463, the total of excluded COD income
for the four MEG Group debtor members. The single-entity
approach advocated by respondent would have resulted in a
remaining CNOL of $15,692,217 for MEG Group following its
short taxable year ending October 1, 1998. Although the
notice of deficiency pertains to petitioner’s 2003 and 2004 cal-
endar tax years, the resolution of the instant matter depends
on the appropriate method of tax attribute reduction used by
MEG Group for its short taxable year ending October 1,
1998. Both parties agree that, if the separate-entity approach
76             145 UNITED STATES TAX COURT REPORTS                      (69)


is proper pursuant to section 108(b)(2)(A), petitioner is not
liable for any income tax deficiencies for 2003 and 2004. On
the other hand, the parties agree that if the single-entity
approach is proper pursuant to section 108(b)(2)(A), peti-
tioner is liable for the additional tax as set forth in the notice
of deficiency.
   Section 172(e) provides that ‘‘[i]n determining the amount
of any net operating loss carryback or carryover to any tax-
able year, the necessary computations involving any other
taxable year shall be made under the law applicable to such
other taxable year.’’ The law governing the instant matter is
the law applicable for the year in which the COD income was
excluded by MEG, Fleer, Heroes, and Malibu. See Laney v.
Commissioner, T.C. Memo. 1997–403, 1997 Tax Ct. Memo
LEXIS 484, at *32 (‘‘[T]he nature and amount of the carry-
over item is determined and redetermined under the law in
effect for the year in which the carryover item arose * * *
rather than the year(s) to which the carryover item is car-
ried.’’), aff ’d without published opinion, 168 F.3d 482 (4th
Cir. 1999). Accordingly, the resolution of this case will be
based on the relevant law in effect for petitioner’s short tax-
able year ending October 1, 1998.
2. Applicable Law
  Section 61(a) generally defines gross income as ‘‘all income
from whatever source derived’’. This includes income from
the ‘‘discharge of indebtedness’’. Sec. 61(a)(12); see also
Gitlitz v. Commissioner, 531 U.S. 206, 213 (2001). Section
108(a) provides certain exceptions to this general rule. One
of these exceptions provides that COD income is excluded
from the taxpayer’s gross income if ‘‘the discharge occurs in
a title 11 case’’. 4 Sec. 108(a)(1)(A). However, the price of
exclusion is that certain of the taxpayer’s favorable tax
attributes must be reduced to the extent of the excluded
COD income. Section 108(b) provides, in pertinent part:
     SEC. 108(b). REDUCTION OF TAX ATTRIBUTES.—
       (1) IN GENERAL.—The amount excluded from gross income under
     subparagraph (A), (B), or (C) of subsection (a)(1) shall be applied to
     reduce the tax attributes of the taxpayer as provided in paragraph (2).

 4 Title   11 governs bankruptcy cases.
(69)             MARVEL ENTM’T, LLC v. COMMISSIONER                      77


         (2) TAX ATTRIBUTES AFFECTED; ORDER OF REDUCTION.—Except as
       provided in paragraph (5), the reduction referred to in paragraph (1)
       shall be made in the following tax attributes in the following order:
           (A) NOL.—Any net operating loss for the taxable year of the dis-
         charge, and any net operating loss carryover to such taxable year.

   Both parties agree that, pursuant to section 108(a)(1)(A),
MEG, Fleer, Heroes, and Malibu correctly excluded their por-
tions of $171,462,463 of COD income from their respective
gross incomes for the short taxable year ending October 1,
1998. The parties also agree that MEG Group had a
$187,154,680 CNOL for its short taxable year ending October
1, 1998. However, the parties disagree over what constitutes
a taxpayer’s NOL under section 108(b)(2)(A) when that tax-
payer is a member of a consolidated group. Respondent con-
tends that the NOL subject to reduction is the consolidated
group’s entire CNOL. Petitioner contends that the NOL sub-
ject to reduction is an allocable portion of CNOL attributable
to each member of the consolidated group. Whether the NOL
to be reduced under section 108(b)(2)(A) is the entire CNOL
or an allocable portion of the CNOL is the sole issue for reso-
lution in this case.
3. United Dominion
   To resolve the issue in this case we must determine
whether a consolidated group can allocate and apportion its
CNOL to its consolidated group members so that each
member can have a separate NOL subject to reduction under
section 108. Respondent’s primary position is that consoli-
dated group members are prohibited from having separate
NOLs unless specifically authorized to do so by a provision
of the consolidated return regulations. Respondent asserts
that ‘‘[t]he question of whether members of a consolidated
group have separate NOLs was considered and decided by
the Supreme Court in United Dominion Indus., Inc. v. * * *
[United States], 532 U.S. 822 (2001)’’. Petitioner contends
that United Dominion ‘‘addressed an entirely different ques-
tion than the issue before this Court, a question that had
nothing to do with section 108.’’
   United Dominion involved the appropriate method for cal-
culating product liability losses (PLL) of an affiliated group
of corporations that elected to file a consolidated return. For
the years at issue in United Dominion (i.e., 1983–86), section
78           145 UNITED STATES TAX COURT REPORTS                       (69)


172 allowed PLLs to be carried back 10 years rather than the
3 years generally permitted for normal NOLs. A taxpayer’s
PLL was defined in section 172(j)(1) as the lesser of: (1) the
taxpayer’s NOL for the year and (2) the taxpayer’s allowable
deductions attributable to product liability expenses (PLE).
In other words, a taxpayer’s PLL was the total of its PLEs,
limited to the amount of its NOL. United Dominion, 532 U.S.
at 825.
   The issue presented in United Dominion was how to cal-
culate the PLL of a consolidated group eligible for the 10-
year carryback under section 172. The Government argued
that the PLL of a consolidated group member should be
determined using a ‘‘ ‘separate-member’ approach’’ (i.e., com-
paring each group member’s PLEs to that member’s separate
NOL). Id. at 828, 831. The Government proposed that a
group member’s negative separate taxable income should
serve as a proxy for that member’s separate NOL. Id. Pursu-
ant to this approach, PLEs ‘‘incurred by an affiliate with
positive separate taxable income cannot contribute to a PLL
eligible for 10-year carryback.’’ Id. at 828. Therefore, under
the Government’s methodology, the taxpayer would have
been prevented from taking full advantage of certain group
members’ PLEs.
   The taxpayer argued that the PLLs for a consolidated
group should be determined using a ‘‘ ‘single-entity’
approach’’ (i.e., comparing the consolidated group’s CNOL to
the aggregate PLEs of the group members). Id. at 827. The
single-entity approach benefited the taxpayer in United
Dominion because its CNOL exceeded its aggregate PLEs in
each of the years at issue, thus making all PLEs eligible for
a 10-year carryback.
   The Supreme Court began its opinion by rejecting the
Government’s argument that a consolidated group member’s
separate taxable income acts as a ‘‘surrogate’’ for a separate
NOL, thereby allowing a group member’s separate taxable
income to be compared with its PLEs in order to determine
a separate PLL. 5 Id. at 831–832. The Court explained por-
  5 The Court explained that a consolidated group member’s separate tax-

able income ‘‘excludes several items that an individual taxpayer would nor-
mally account for in computing income or loss, but which an affiliated
group may tally only at the consolidated level, such as capital gains and
losses, charitable-contribution deductions, and dividends-received deduc-
(69)          MARVEL ENTM’T, LLC v. COMMISSIONER                          79


tions of the consolidated return regulations pertaining to
consolidated taxable income and CNOL as follows:
  Under Treas. Regs. §§ 1.1502–11(a) and 1.1502–21(f), an affiliated
  group’s ‘‘consolidated taxable income’’ (CTI), or, alternatively, its
  ‘‘consolidated net operating loss’’ (CNOL), is determined by ‘‘taking into
  account’’ several items. The first is the ‘‘separate taxable income’’ (STI)
  of each group member. A member’s STI (whether positive or negative)
  is computed as though the member were a separate corporation (i.e., by
  netting income and expenses), but subject to several important ‘‘modi-
  fications.’’ Treas. Reg. § 1.1502–12. These modifications require a group
  member calculating its STI to disregard, among other items, its capital
  gains and losses, charitable-contribution deductions, and dividends-
  received deductions. Ibid. These excluded items are accounted for on a
  consolidated basis, that is, they are combined at the level of the group
  filing the single return, where deductions otherwise attributable to one
  member (say, for a charitable contribution) can offset income received by
  another (from a capital gain, for example). Treas. Regs. §§ 1.1502–
  11(a)(3) to (8); 1.1502–21(f)(2) to (6). A consolidated group’s CTI or
  CNOL, therefore, is the sum of each member’s STI, plus or minus a
  handful of items considered on a consolidated basis. [United Dominion,
  532 U.S. at 826.]

   The Supreme Court ultimately agreed with the taxpayer,
holding (8 to 1) that a ‘‘group’s product liability loss must be
figured on a consolidated basis in the first instance, and not
by aggregating product liability losses separately determined
company by company.’’ Id. at 824. In arriving at this conclu-
sion the Court examined the consolidated return regulations
and emphasized that ‘‘the Code and regulations governing
affiliated groups of corporations filing consolidated returns
provide only one definition of NOL: ‘consolidated’ NOL’’. Id.
at 829. The Court also instructed that a generally applicable
concept of a separate NOL in the consolidated return context
‘‘simply does not exist.’’ Id. at 830.
   The Court’s analysis was as follows:
     The first step in applying the definition and methodology of PLL to a
  taxpayer filing a consolidated return thus requires the calculation of
  NOL. As * * * [the taxpayer] correctly points out, the Code and regula-
  tions governing affiliated groups of corporations filing consolidated
  returns provide only one definition of NOL: ‘‘consolidated’’ NOL, see
  Treas. Reg. § 1.1502–21(f). There is no definition of separate NOL for a

tions.’’ United Dominion Indus., Inc. v. United States, 532 U.S. 822, 832
(2001). This causes a group member’s separate taxable income to be in-
flated by eliminating certain deductions or deflated by eliminating certain
items of income such as capital gains. Id.
80            145 UNITED STATES TAX COURT REPORTS                         (69)

  member of an affiliated group. Indeed, the fact that Treasury Regula-
  tions do provide a measure of separate NOL in a different context, for
  an affiliated corporation as to any year in which it filed a separate
  return, infra, at 832–834, underscores the absence of such a measure for
  an affiliated corporation filing as a group member. Given this apparently
  exclusive definition of NOL as CNOL in the instance of affiliated entities
  with a consolidated return (and for reasons developed below, infra, at
  834–838) we think it is fair to say, as * * * [the taxpayer] says, that
  the concept of separate NOL ‘‘simply does not exist.’’ Brief for Petitioner
  15. The exclusiveness of NOL at the consolidated level as CNOL is
  important here for the following reasons. The Code’s authorization of
  consolidated group treatment contains no indication that for a consoli-
  dated group the essential relationship between NOL and PLL will differ
  from their relationship for a conventional corporate taxpayer. Nor does
  any Treasury Regulation purport to change the relationship in the
  consolidated context. If, then, the relationship is to remain essentially
  the same, the key to understanding it lies in the regulations’ definition
  of net operating loss exclusively at the consolidated level. Working back
  from that, PLEs should be considered first in calculating CNOL, and
  they are: because any PLE of an affiliate affects the calculation of its
  STI, that same PLE necessarily affects the CTI or CNOL in exactly the
  same way, dollar for dollar. And because, by definition, there is no NOL
  measure for a consolidated return group or any affiliate except
  CNOL, PLEs cannot be compared with any NOL to produce PLL
  until CNOL has been calculated. Then, and only then in the case of the
  consolidated filer, can total PLEs be compared with a net operating loss.
  In sum, comparable treatment of PLL in the instances of the usual cor-
  porate taxpayer and group filing a consolidated return can be achieved
  only if the comparison of PLEs with a limiting loss amount occurs at the
  consolidated level after CNOL has been determined. This approach
  resting on comparable treatment has a further virtue entitled to some
  weight in case of doubt: it is (relatively) easy to understand and to apply.
  [United Dominion, 532 U.S. at 829–831; fn. ref. omitted.]

   The Court also examined section 1.1502–79(a)(3), Income
Tax Regs., which apportions a consolidated group’s CNOL to
members of the group for the purpose of carrying back losses
to separate return years. 6 The Court acknowledged that sec-
tion 1.1502–79(a)(3), Income Tax Regs., provides a close
analogy for a separate member NOL but found that this
  6 Sec. 1.1502–79(a)(3), Income Tax Regs., is the precursor to sec. 1.1502–
21(b)(2)(iv), Income Tax Regs., and allows for the allocation or apportion-
ment of CNOL in limited circumstances. Under this regulation the amount
of CNOL that is apportioned to a consolidated group member is the
amount attributable to the member, which is the group’s CNOL multiplied
by a fraction. The numerator of the fraction is the separate NOL of the
member, and the denominator is the sum of the separate NOLs of all
group members in such year having such losses.
(69)        MARVEL ENTM’T, LLC v. COMMISSIONER              81


regulation applies only narrowly to determine carryback and
carryforward NOLs to separate return years in which the
member was not part of the consolidated group. The Court
reasoned that, because no carrybacks to separate return
years were at issue, section 1.1502–79(a)(3), Income Tax
Regs., was inapplicable in calculating the taxpayer’s PLL
using the separate-entity approach. Id. at 833. In describing
the inapplicability of the apportionment rules, the Court
stated that section 1.1502–79(a)(3), Income Tax Regs.,
‘‘unbakes the cake for only one reason, and that reason has
no application here.’’ Id.
   Petitioner’s argument that United Dominion addresses an
issue distinctly different from tax attribute reduction under
section 108 fails to recognize that the Supreme Court’s deci-
sion concerning the proper computation of a consolidated
group’s PLL could only have been reached by first deter-
mining whether members of a consolidated group have sepa-
rate NOLs. We agree with petitioner that United Dominion
concerned the application of PLL carryback rules in the
consolidated group context. However, a central prerequisite
to the Supreme Court’s decision in United Dominion was the
legal determination of whether separate NOLs exist for
consolidated group members where no specific rule provides
authority for NOL computation on a separate-entity basis.
   Despite the fact that the matter currently before the Court
involves the application of section 108(b)(2)(A)—rather than
section 172—the critical issue is identical to that in United
Dominion: whether the pre-2003 consolidated return regula-
tions allow for the separate-entity approach. The Supreme
Court in United Dominion concluded that a consolidated
group member cannot have a separate NOL for a consoli-
dated return year unless a specific consolidated return regu-
lation allocates and apportions part of the CNOL to that
member. No such regulation existed for petitioner’s short tax-
able year ending October 1, 1998, and therefore the proper
NOL subject to reduction under section 108(b)(2)(A) is peti-
tioner’s CNOL. In applying the Supreme Court’s holding in
United Dominion to the matter currently before us, we con-
clude that the NOL subject to reduction under section
108(b)(2)(A) for petitioner’s short tax year ending October 1,
1998, is the consolidated group’s CNOL.
82           145 UNITED STATES TAX COURT REPORTS            (69)


4. Petitioner’s Arguments
     a. Statutory Language
   Despite our conclusion above that United Dominion is dis-
positive in the instant matter, we nonetheless will address
petitioner’s remaining arguments. Petitioner argues that the
‘‘clear and unambiguous’’ language of section 108 pertains
exclusively to the individual members of a consolidated
group. According to petitioner, the words ‘‘the taxpayer’’ in
both section 108(b)(1) and (2) ‘‘refer only to the debtor
member [of a consolidated group] that has excluded COD
income as a result of that member’s bankruptcy.’’ Petitioner
therefore reasons that ‘‘the tax attributes’’ subject to reduc-
tion under section 108(b)(2)(A) cannot include the CNOL of
the entire affiliated group because ‘‘the CNOL is not an
attribute belonging to an individual member of a consoli-
dated group, and thus cannot be what is reduced under sec-
tion 108(b).’’
   Respondent does not dispute that ‘‘the statutory language
appears to have been written with stand-alone companies in
mind.’’ However, respondent contends that ‘‘this is a common
statutory construct, because Congress delegated authority to
the Secretary to promulgate regulations that would make the
adjustments necessary to apply general Code provisions to
groups filing consolidated returns.’’
   When the relevant statutory language is clear and
unambiguous and the statutory scheme is coherent and con-
sistent, the Court’s function is to apply the statute as written
and according to its terms. Robinson v. Shell Oil Co., 519
U.S. 337, 340 (1997); Fernandez v. Commissioner, 114 T.C.
324, 329–330 (2000). The statute must be read as a whole,
and the meaning of a particular portion of a statutory provi-
sion must be determined with reference to its context. See
FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,
133 (2000). If a statute is ambiguous or silent, we may look
to the statute’s legislative history in an attempt to determine
congressional intent. Burlington N. R.R. v. Okla. Tax
Comm’n, 481 U.S. 454, 461 (1987); Fernandez v. Commis-
sioner, 114 T.C. at 329–330.
   Section 108(a)(1)(A) provides, in pertinent part, that
‘‘[g]ross income does not include any amount which (but for
this subsection) would be includible in gross income by rea-
(69)          MARVEL ENTM’T, LLC v. COMMISSIONER                        83


son of the discharge (in whole or in part) of indebtedness of
the taxpayer if * * * the discharge occurs in a title 11 case’’.
(Emphasis added.) Section 108(b)(1) further provides that
‘‘[t]he amount excluded from gross income * * * shall be
applied to reduce the tax attributes of the taxpayer’’.
(Emphasis added.) Absent an election under section
108(b)(5), 7 the taxpayer must first reduce ‘‘[a]ny net oper-
ating loss for the taxable year of the discharge, and any net
operating loss carryover to such taxable year.’’ Sec.
108(b)(2)(A). Because MEG Group did not make an election
under section 108(b)(5), the first tax attributes subject to
reduction are MEG Group’s current year and carryover
NOLs.
    Ordinarily, a corporation that is not a member of a consoli-
dated group computes its NOL on a stand-alone basis. Thus,
where a corporation with excluded COD income is not a
member of a consolidated group, the NOL to be reduced is
clear. However, section 108 does not lend this degree of
clarity to the consolidated return scenario. Although we
agree with the parties that section 108 appears to have been
written in contemplation of stand-alone entities, nowhere
does the statute specifically define ‘‘the taxpayer’’ as either
a member entity of a consolidated group or the consolidated
group as a whole. Furthermore, section 108 does not articu-
late whether the ‘‘tax attributes’’ subject to reduction are
those at the consolidated level or are those allocable to each
member entity.
    Although the legislative history of section 108(b) does not
include any specific indication of legislative intent concerning
the application of section 108(b)(2)(A) to consolidated groups,
it does provide insight into the general purpose of section
108(b). The report of the Senate Committee on Finance
states that section 108 is
  intended to carry out the Congressional intent of deferring, but eventu-
  ally collecting within a reasonable period, tax on ordinary income
  realized from debt discharge. Thus in the case of a bankrupt or insolvent
  debtor, the debt discharge amount is applied to reduce the taxpayer’s net
  operating losses and certain other tax attributes, unless the taxpayer

  7 A taxpayer can elect to reduce the basis of any depreciable property by

the amount of debt discharged before reducing the amounts of any other
tax attributes. Sec. 108(b)(5). MEG Group did not make such an election.
84              145 UNITED STATES TAX COURT REPORTS                   (69)

 elects to apply the amount first to reduce basis in depreciable assets.
 * * * [S. Rept. No. 96–1035, at 10–11 (1980), 1980–2 C.B. 620, 625.]

In a notice of proposed rulemaking, the Department of the
Treasury succinctly summarized this legislative history as
follows:
   The legislative history of the Bankruptcy Tax Act states that the
 exclusion of discharge of indebtedness (COD income) from gross income
 under section 108 is intended to promote a debtor’s fresh start. S. Rep.
 No. 1035, 96th Cong., 2d Sess. 10 (1980), 1980–2 C.B. 620, 624; H.R.
 Rep. No. 833, 96th Cong., 2d Sess. 11 (1980). The exclusion provided by
 the statute generally operates, however, to defer, rather than eliminate,
 income from discharge of indebtedness. [62 Fed. Reg. 955, 956 (Jan. 7,
 1997).]

   To minimize the potential for permanent exclusion, a
consolidated group member that excludes COD income must
reduce tax attributes which would otherwise be available to
offset its income. A consolidated group’s CNOL is a favorable
tax attribute that consolidated group members share. In
order for the legislative objective of deferral to be accom-
plished while the group is intact, attribute reduction must be
applied to the CNOL as a whole and not some lesser portion
deemed attributable to the debtor member. MEG Group’s
apportionment of its CNOL to its consolidated group mem-
bers for purposes of section 108(b) attribute reduction pro-
duced a result that was inconsistent with the intent of Con-
gress to defer, rather than permanently eliminate, COD
income. Thus, our decision that United Dominion prohibits
the separate-entity approach for petitioner’s short taxable
year ending October 1, 1998, comports with Congress’
intention that COD income be deferred rather than elimi-
nated wholesale.
     b. Section 1017 Argument
  Petitioner also argues that section 1017 8 is evidence that
Congress intended for consolidated groups to use the sepa-
rate-entity approach under section 108(b)(2)(A). Section
1017(b)(3)(D) provides a special rule for reducing asset basis
under section 108 in the case of an affiliated group, providing
a lookthrough rule that allows for basis reduction when a
member of a consolidated group holds stock in a subsidiary.
 8 Sec.   1017 is cross-referenced in sec. 108(b)(2)(E)(ii).
(69)        MARVEL ENTM’T, LLC v. COMMISSIONER               85


Petitioner argues that section 1017 demonstrates that Con-
gress was cognizant of the application of section 108 in the
consolidated group context and provided specific rules for
consolidated groups where the default separate-entity
approach was not intended. Because there is no similar Code
provision detailing NOL reduction for consolidated groups
under section 108(b)(2)(A), petitioner concludes that Congress
intended for the separate-entity approach to apply.
   We disagree with petitioner’s argument for the following
reasons. First, as previously discussed, the plain language of
section 108 does not demonstrate that Congress intended the
application of the separate-entity approach as a default rule
for tax attribute reduction. Second, the fact that Congress
enacted a special rule for consolidated groups in section
1017(b)(3)(D) is not instructive as to what it intended under
section 108(b)(2)(A). In our view, a more plausible expla-
nation for the enactment of section 1017(b)(3)(D) was Con-
gress’ desire to provide specific and immediate relief for
consolidated groups in this narrow context. Accordingly, we
will refrain from inferring congressional intent based on the
mere absence in section 108(b)(2)(A) of a rule corollary to sec-
tion 1017(b)(3)(D).
  c. Consolidated Return Regulations
   The law applicable to MEG Group’s 1998 tax attribute
reduction also includes the consolidated return regulations in
effect at that time. See sec. 1502 (providing that the Sec-
retary shall prescribe regulations that are necessary to deter-
mine consolidated groups’ tax liabilities). Petitioner argues
that these consolidated return regulations ‘‘require the deter-
mination of an individual member’s share of the consolidated
group’s CNOL.’’
   The Code applies to a consolidated group to the extent that
the consolidated return regulations do not provide otherwise.
Sec. 1.1502–80(a), Income Tax Regs. A consolidated group
member’s gross income and deductions for a consolidated
return year are included in the computation of the entire
group’s consolidated taxable income or CNOL. Secs. 1.1502–
11(a), 1.1502–12, Income Tax Regs.; sec. 1.1502–21T(e), Tem-
porary Income Tax Regs., 61 Fed. Reg. 33333 (June 27,
1996). Section 1.1502–21T(b)(2), Temporary Income Tax
86            145 UNITED STATES TAX COURT REPORTS                        (69)


Regs., 61 Fed. Reg. 33328 (June 27, 1996), 9 provides that,
when a member of a consolidated group leaves the group, a
portion of the group’s CNOL is allocated to the departing
member. In addition, section 1.1502–21T(b)(2), Temporary
Income Tax Regs., supra, applies to apportion a consolidated
group’s CNOL to group members in certain circumstances in
order to carry back losses to pre-consolidated-return years.
  For COD income discharged after August 29, 2003, section
1.1502–28T, Temporary Income Tax Regs., 68 Fed. Reg.
69025 (Dec. 11, 2003), prescribes a hybrid approach that first
reduces the tax attributes of the member entity, then applies
a lookthrough rule to reduce attributes of the member
entity’s subsidiaries, and lastly reduces attributes of the
consolidated group. With slight modifications, this temporary
regulation was adopted as final and effective for COD income
discharged after March 21, 2005. Sec. 1.1502–28(d), Income
Tax Regs. 10
  Petitioner’s argument that the pre-2003 consolidated
return regulations allow for the separate-entity approach
under section 108(b)(2)(A) is without merit. The matter sub
judice involves MEG Group’s tax year ending October 1,
1998, which is before the Commissioner’s issuance of section
1.1502–28T, Temporary Income Tax Regs., supra, or the
adoption of section 1.1502–28, Income Tax Regs. The pre-
2003 consolidated return regulations did not specifically
articulate how a consolidated group should reduce its tax
attributes under section 108(b). However, as previously dis-
cussed, the Supreme Court in United Dominion Indus., Inc.
v. Commissioner, 532 U.S. 822 (2001), found that the pre-
2003 consolidated return regulations did in fact prohibit the
   9 Sec. 1.1502–21T, Temporary Income Tax Regs., 61 Fed. Reg. 33328

(June 27, 1996), was a temporary regulation in petitioner’s short taxable
year ending October 1, 1998.
   10 These post-United Dominion regulations appear to follow the invita-

tion of the Supreme Court:
    Thus, it is true, as the Government has argued, that ‘‘[t]he Internal
  Revenue Code vests ample authority in the Treasury to adopt consoli-
  dated return regulations to effect a binding resolution of the question
  presented in this case.’’ Brief for United States 19–20. To the extent that
  the Government has exercised that authority, its actions point to the sin-
  gle-entity approach as the better answer. To the extent the Government
  disagrees, it may amend its regulations to provide for a different one.
  [United Dominion, 532 U.S. at 838.]
(69)        MARVEL ENTM’T, LLC v. COMMISSIONER               87


allocation of separate NOLs for consolidated group members
unless it was within the ambit of a specific regulatory provi-
sion. For this reason, we are not persuaded by petitioner’s
argument to the contrary.
  d. Temple-Inland
   In an attempt to bolster its position that United Dominion
has no significance with respect to attribute reduction under
section 108, petitioner cites Temple-Inland, Inc. v. United
States, 68 Fed. Cl. 561 (2005). Temple-Inland involved dam-
ages resulting from the Government’s breach of a thrift
acquisition agreement under which a consolidated group
acquired three failing thrifts. Id. at 562–563. Among the
damages were the values of lost income tax deductions
caused by the Government’s enactment of legislation that
eliminated the tax benefits associated with the thrift acquisi-
tion agreement. Id. at 563. After an examination of the
consolidated group’s tax returns for the years at issue, the
taxpayer and the Internal Revenue Service (IRS) entered into
a closing agreement which included agreed-upon amounts for
the taxpayer’s bad debt deductions for the taxable years 1991
and 1992. Id. at 563, 568.
   Following the execution of the closing agreement, the
Government disagreed with the taxpayer’s computation of
the deductions. Id. at 564–565. The Government argued that
the group’s consolidated tax attributes should have been
reduced under section 108(b). Id. at 569. The U.S. Court of
Federal Claims held for the taxpayer, ruling that the closing
agreement between the IRS and the taxpayer specifically
provided that tax attribute reduction would be limited to the
tax attributes that were generated by the insolvent consoli-
dated group members. Id. at 569.
   Although the Temple-Inland court made its determination
on the basis of the closing agreement, the court included a
footnote stating: ‘‘United Dominion dealt with the carryback
period for product liability losses under section 172(b) and
has nothing to do with [s]ection 108.’’ Id. at 569 n.5. Peti-
tioner emphasizes this footnote to support the proposition
that United Dominion is ‘‘narrow in scope’’ and ‘‘ha[s] no
significance with respect to section 108.’’
   Petitioner’s reliance on a footnote in Temple-Inland is mis-
placed. Temple-Inland does not address the central issue of
88           145 UNITED STATES TAX COURT REPORTS            (69)


whether a CNOL can be apportioned among consolidated
group members absent a rule in the consolidated return
regulations allowing for such apportionment. The holding of
Temple-Inland is based on the finality of the closing agree-
ment between the IRS and the taxpayer and has nothing to
do with the application of section 108(b)(2)(A) to a member
of a consolidated group. For this reason we are unpersuaded
by petitioner’s argument that Temple-Inland limits the
application of United Dominion to section 172.
     e. Gottesman
   Petitioner alternatively contends that its application of the
separate-entity approach should prevail because the method
was reasonable under existing law when its consolidated tax
return was filed for 1998. Petitioner cites Gottesman & Co.
v. Commissioner, 77 T.C. 1149 (1981), in support of the
proposition that a taxpayer’s reasonable interpretation will
be upheld where the Secretary has failed to issue sufficient
guidance under the consolidated return regulations. As evi-
dence that the separate-entity approach to attribute reduc-
tion was ‘‘reasonable under the circumstances’’ before United
Dominion—and thus, analogous to Gottesman—petitioner
cites multiple IRS private letter rulings.
   In Gottesman the issue was whether the regulations
promulgated by the Secretary under section 1502 required
accumulated taxable income for section 531 purposes to be
calculated on a separate company basis or on a consolidated
basis. Id. at 1149–1150. Before 1966 affiliated corporations
filing consolidated returns were required by the regulations
to compute their accumulated taxable income on a combined
basis for section 531 purposes. Id. at 1152–1153. The 1966
regulations were silent on the issue. Id. at 1153–1155. The
Secretary proposed regulations requiring computation on a
combined basis in 1968, withdrew the proposed regulations
in 1971 without explanation, and did not issue new proposed
regulations until 1979. Id. at 1155.
   We addressed whether it was proper for the taxpayer to
apply a separate company method for the taxpayer’s 1973–
75 tax years. Id. at 1157–1158. In holding for the taxpayer,
we stated:
(69)          MARVEL ENTM’T, LLC v. COMMISSIONER                      89


     We cannot fault * * * [the taxpayer] 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
  years at issue. This ambiguity was of the Commissioner’s making, and,
  as such, must be held against him * * * [The taxpayer’s] interpretation
  of these regulations was reasonable under the circumstances. * * *
     [Id.]

   In Gottesman we upheld the taxpayer’s interpretation of
the consolidated return regulations as ‘‘reasonable under the
circumstances’’ because of an ‘‘ambiguity’’ in the existing law.
The ambiguity in the applicable regulations had not been
resolved by the Supreme Court when Gottesman was decided.
However, the Supreme Court in United Dominion, 532 U.S.
at 834, ‘‘expressly and exclusively defin[ed] NOL as CNOL’’
in the consolidated return context. The fact that United
Dominion was decided in 2001 whereas the relevant year for
purposes of determining the application of section 108 and
the meaning of NOL is 1998 is of no consequence because
Supreme Court opinions generally ‘‘must be given full retro-
active effect’’. See Harper v. Va. Dep’t of Taxation, 509 U.S.
86, 97 (1993) (‘‘When this Court applies a rule of federal law
to the parties before it, that rule is the controlling interpreta-
tion of federal law and must be given full retroactive effect
in all cases still open on direct review and as to all events,
regardless of whether such events predate or postdate our
announcement of the rule.’’); Hawknet, Ltd. v. Overseas Ship-
ping Agencies, 590 F.3d 87, 91 (2d Cir. 2009) (citing Harper,
509 U.S. at 97); Miller v. Commissioner, T.C. Memo. 2001–
55, 2001 Tax Ct. Memo LEXIS 65, at *14 (‘‘When the U.S.
Supreme Court announces a rule of law and applies it to the
litigants in the case announcing the rule, that rule applies
retroactively to all other pending cases unless barred by the
statute of limitations or res judicata.’’).
   The issue in the current case, which was central to the
opinion of the Supreme Court in United Dominion, is identi-
fying the appropriate NOL in the consolidated return con-
text. Although we acknowledge that petitioner’s application
of the separate-entity approach in filing its 1998 consolidated
tax return was plausible at the time, it is contrary to the rule
in the consolidated return regulations as interpreted by the
90         145 UNITED STATES TAX COURT REPORTS              (69)


Supreme Court in United Dominion. Petitioner’s application
of the separate-entity approach for purposes of defining NOL
not only conflicts with the binding precedent of United
Dominion, but also is the approach specifically rejected by
the Supreme Court in that case. Because United Dominion
clarified that a separate NOL does not exist in the consoli-
dated return regulations, there is no remaining ambiguity as
to this issue for petitioner’s consolidated return for the short
taxable year ending October 1, 1998. Therefore Gottesman is
inapplicable to the current case.
   Regarding petitioner’s argument concerning the IRS’ pre-
United Dominion determinations advocating the separate-
entity approach, section 6110(k)(3) explicitly provides that
the IRS’ written determinations are not precedential. We also
note that the private letter rulings and written determina-
tions that petitioner cited were issued before the Govern-
ment’s position in United Dominion was rejected by the
Supreme Court.
   In conclusion, we find that respondent correctly applied
section 108(b)(2)(A) in accordance with the Supreme Court’s
opinion in United Dominion. Neither the Code nor the
applicable consolidated return regulations provide authority
for an affiliated group to allocate and apportion CNOL to
consolidated group members for purposes of reducing tax
attributes pursuant to section 108(b)(2)(A). We hold that for
the relevant consolidated return years in issue the consoli-
dated return regulations required that a consolidated group’s
entire CNOL be treated as the NOL subject to reduction.
   In reaching our decision, we have considered all arguments
made by the parties, and to the extent not mentioned or
addressed, they are irrelevant or without merit.
   To reflect the foregoing,
                  An appropriate order and decision will be
                entered granting respondent’s motion for
                summary judgment and denying petitioner’s
                motion for summary judgment.

                        f
