                  T.C. Memo. 2000-67



                UNITED STATES TAX COURT



      CHICAGO MERCANTILE EXCHANGE, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket Nos. 8984-95, 16082-95.   Filed March 2, 2000.



     P is a not-for-profit corporation that operates a
commodity exchange in Chicago, Illinois. R argues that
P has no affiliates within the meaning of sec.
204(a)(7)(C) of the Tax Reform Act of 1986 (TRA), Pub.
L. 99-514, 100 Stat. 2085, 2155, because P is not a
member of a controlled group of corporations. R
asserts that the flush language of TRA sec. 204(a)(7),
which provides that “a corporation is an affiliate of
another corporation if both corporations are members of
a controlled group of corporations”, is the exclusive
definition of the word “affiliates” for purposes of TRA
sec. 204(a)(7).
     Held: The flush language on which R relies merely
specifies when a corporation will be considered to be
an “affiliate” of another corporation; it does not
contain the exclusive definition of that word for
purposes of TRA sec. 204(a)(7).
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     Dennis E. Frisby, Ira Marcus, Jack Esses, and Thomas C.

Borders, for petitioner.

     Robert M. Ratchford, for respondent.



                          MEMORANDUM OPINION


     LARO, Judge:     Respondent moves for summary judgment in his

favor, arguing that petitioner has no affiliates within the

meaning of section 204(a)(7)(C) of the Tax Reform Act of 1986

(TRA), Pub. L. 99-514, 100 Stat. 2085, 2155, because it is not a

member of a controlled group of corporations, which, respondent

asserts, is a requirement of that section.     We will deny

respondent’s motion.    We hold that a taxpayer need not be a

member of a controlled group of corporations to have affiliates

for purposes of TRA section 204(a)(7)(C).      Unless otherwise

stated, section references are to the TRA.

                              Background1

     Petitioner is a corporation organized under the General Not

For Profit Corporation Act of the State of Illinois to operate a

commodity exchange.    It is a designated contract market that

provides and regulates a commodity exchange in Chicago, Illinois,

where futures contracts and options on futures contracts are


     1
       All facts were stipulated by the parties in stipulation
100 of the second supplemental stipulation of facts.
                                 - 3 -

traded.   It is owned by its approximately 2,700 members, and its

principal place of business was in Chicago, Illinois, when it

petitioned the Court.   It is not a member of a controlled group

of corporations within the meaning of section 1563(a) of the

Internal Revenue Code of 1986.

                              Discussion

     The parties agree that respondent’s motion can be decided by

way of summary judgment, and so do we.     Respondent argues that

petitioner has no affiliates for purposes of section 204(a)(7)(C)

because it is not a member of a controlled group of corporations.

Respondent asserts that the word “affiliates” for purposes of

section 204(a)(7)(C) requires that the taxpayer be a corporation

and that the corporation be a member of a controlled group.

Respondent relies on the flush language of section 204(a)(7),

asserting that this language sets forth the exclusive definition

of the word “affiliates” for purposes of section 204(a)(7)(C).

     We disagree with respondent’s assertion that the flush

language of section 204(a)(7) contains the exclusive definition

of the word “affiliates” for purposes of section 204(a)(7).

Section 204(a)(7) provides:

          (7) Certain Leasehold Improvements.– * * * [The
     repeal of the investment tax credit and accelerated
     cost recovery system] shall not apply to any reasonable
     leasehold improvements, equipment and furnishings
     placed in service by a lessee or its affiliates if–-

               (A) the lessee or an affiliate is the
          original lessee of each building in which
          such property is to be used,
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               (B) such lessee is obligated to lease
          the building under an agreement to lease
          entered into before September 26, 1985, and
          such property is provided for such building,
          and

               (C) such buildings are to serve as world
          headquarters of the lessee and its
          affiliates.

     For purposes of this paragraph, a corporation is an
     affiliate of another corporation if both corporations
     are members of a controlled group of corporations
     within the meaning of section 1563(a) of the Internal
     Revenue Code of 1954 without regard to section
     1563(b)(2) of such Code. Such lessee shall include a
     securities firm that meets the requirements of
     subparagraph (A), except the lessee is obligated to
     lease the building under a lease entered into on June
     18, 1986.

We do not conclude that the flush language of this section

exclusively defines the word “affiliates” for purposes of its

application.    The flush language merely specifies when a

corporation will be considered to be an affiliate of another

corporation.

     We hold that the flush language of section 204(a)(7)(c) does

not contain the exclusive definition of the word “affiliates”.

Accordingly, we will deny respondent’s motion and set this case

for trial.    Whether petitioner has “affiliates” within the

meaning of section 204(a)(7) is a factual determination that must

be made on the basis of a complete record.    We have considered

all arguments for a contrary holding and, to the extent not

discussed above, find those arguments to be without merit or

irrelevant.    To reflect the foregoing,
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        An appropriate order will be

issued.
