Legal Case Summary

All right, thank you, council. We'll call our next case. Ms. Winkleman. Two have to adjust the mic just a little bit. Good morning, Your Honors. My name is Nancy Winkleman. I'm here on behalf of the Appellants, along with my co-council at Council Table Jerry Riesel. The issue presented to this court is an hour one. The briefs have, I believe, crystallized that issue. The question is whether the gain that all agree when River realized and did not recognize on the deemed liquidation of the subsidiary is an item of income that passes through to the shareholders under 1366. And it doesn't define 1366 does not define item of income does it? Well, actually, Your Honor, that's an interesting question because the regulation, 1366, itself does not define item of income. But the regulation, which we quote in our brief and our reply brief, but the commissioner has not responded to regulation 1

.1366182. And it's at pages 21 through 23 of our opening brief and page 12 of our reply brief. In fact, does define item of income and includes in that definition this very type of income, quote, the corporations combine net amount of gains or losses from the sales or exchanges of capital assets. And it's a very important point because one of the key themes of this case stepping back is that taxpayers should be permitted. In fact, are allowed, are encouraged to rely, must be able to rely in planning their conduct on the plain language of the code, of the regulations. And here we have we've been- So, if this is so plain, why aren't people all over America saying, hey, you know what, instead of paying two, paying taxes on $200 million with the aggregate gain, why don't we end up claiming a $12 million loss by engaging in a Q sub-election and upping a basis when we don't declare income on our reports. It seems like an awfully attractive option. And if it's really all that plain that that's what the code allows, one would think that wealthy folks all over America would be doing it. But you seem to agree that this is a matter of first impression. Is that right? Putting aside the principles that were established and getlets and farly, which we briefed extensively, both parties did, that's correct, Your Honor. And I can't speak to other individuals what I can speak to, though, is- It does make it seem like it's a little less plain than you're saying, though, doesn't it? Let me walk through the provisions that collectively lead to the result that we encourage the court to find here. And start with where Judge Antwerpon started

. What is an item of income under Section 1366 of the code? And you would agree also that the code supersedes regulations. You can't have regulations that are inconsistent with the code. That's correct, Your Honor. And there's nothing inconsistent. The regulation defines what item of income is. And the commissioners own revenue ruling, which I think- How about internal revenue code section 331 and 332? They do not recognize corporate litigation gains as income, do they? Your Honor, Section 332 provides that this type of gain is not recognized. And that's key. That's key to the taxpayer's position here. Just because it's not recognized doesn't mean that it's not an item of income. You look to 1366, you look to the regulation, and very importantly, in terms of taxpayers being able to rely on the code and what the IRS itself has said, you look to the commissioners own revenue ruling, which we cite on pages 8-9 of our reply brief, which is in what the commissioner agrees is an analogous context, the partnership context, in terms of the pass-through element of S corporations. And get listen for, they didn't really involve payments for an indebtedness. That's absolutely correct, Your Honor

. Which is somewhat different than the situation here, isn't it? It's different in some respects, but in terms of what the key respect- Because they're specifically designated as gross income under 61a, right? Well, actually the cancellation of indebtedness income at issue in Get Listen Farley section was Section 108, which said- In 108, it said cancellation of indebtedness is income specifically in the statute. Do you have anything that's akin to that in any statute in this case? Let me try two responses to these questions. The provision at issue in Get Listen Farley section 108 said gross income does not include. The regulation that the commissioner relies on here section 1.616 uses virtually identical language gains on the sale or exchange of property are not recognized. That is, are not included. It's the same scenario. Well, when you say it's the same scenario, certainly counsel for the government will be up here in a minute and speak for themselves. But isn't the pitch that's being made to us that this isn't a sale of property? This is deemed to be a liquidation. But that's a legal fiction for tax purposes. There isn't a sale of property here. And to act as if there were a sale of property here is to take that legal fiction and twist and turn it into something that could be the subject of tremendous abuse

. Like people declaring $200 million worth of income to be a $12 million loss. Don't let them turn a fiction into something that's not. That's the tenor of what I understand. That's an argument I'd like you to respond to. And I agree completely that that's the tenor. And the response is really what the IRS is talking about is more is the policy. This Court made clear in Farley as Judge Roth said, emphasized that this Court's job is not to reach a result of deemed fair to make tax policy. It's to interpret the statute. And in fact, Section 332 works both ways. It could have worked to the taxpayers disadvantage here. It happened to work to the taxpayers advantage. But the government also discusses how it could work the other way

. That's only if one accepts your premise about how 331 and 332 operate. I mean, one has to accept your assertion that this is an item of income. And it is immediately realized in order to get to the point you want to get. And they deny that's the case. And the reason I understand they deny it is because of what we've just been through. This is not a sale property. There's nothing that actually happened there. And you can't treat it as if it is. And it's different from Farley and Gitlett's because 108.7 is included something in the statute and this doesn't. So you're pushed back on that. I understand it is

. Well, the reg says something like that. But do you have anything else besides that to point out that they are reasoning is fault that it's flawed? Well, the starting point 61 a 3 includes this type of gain. It identifies this type of gain as income. And then 1366 says it's an item of income and the regulation says in fact this specific gain is exactly what we're talking about. It doesn't define item of income. Does it. The regulation your honor. How about 1.61-61? Doesn't that interpret gross income as not including unrecognized gains? And we take no we don't we take no issue with that. That's not that we don't view that as a problem because what we know from Gitlett's and Farley is that income that is not included in gross income can still be an item of income under 1366. I want to just mention because I think it's important on this policy point. And I also have a problem with the idea of gaining, well, I guess it isn't 230

. It's $214 million you gain. And the only thing you have to do is take a $12 million loss. That's an amazing section of the code. I'll keep that in mind for next April. It could work both ways. There's certainly nothing wrong with taxpayers minimizing the amount of tax they pay learned in hand has a as a oft quoted statement. There's nothing sinister in arranging ones affairs to keep taxes as low as possible. Sure, but if this were income, it's just it's just remarkable to me that the tax payers here are are taking the position that it's it's income realized. And we don't have any problem with being called unrecognized, but we don't have to put it on we don't have to report it as income. We just get the benefit of bumping our bases by it so we can declare a loss. Let me ask you this question. Is there is there anything to be learned of the government makes a point of saying hey after Farley Gitlett's Congress went in and made it clear they didn't like that outcome

. I made it abundantly clear that they thought that was a wrong outcome and not sort of thing to be repeated. Should we draw the conclusion they ask us to draw from that or does that send us out into the land that Farley said don't go into. I think that's exactly the problem. I think that if one takes from the legislative history that the commissioner relies on, basically tax planning all bets are off. Tax pay or read something in the code read something in the regulation read something in the commissioners own revenue ruling that we talk about that in the partnership concept context says that realized unrecognized gain is income. And it requires the taxpayers to increase their bases. The taxpayers are entitled to rely on the code regulations, the commissioners. But nobody ever before you guys read the code this way it seems like there's the commissioner the tax court judge made a point of saying they never cited a case to me and I haven't found one. We've been looking we haven't found one. Nobody in the United States of America has ever read the code the way your clients have not read the code. So how far do you get with the argument that they're entitled to rely on the code when nobody seems to have seen this in the code before now. There are there isn't a case one way or the other there are often is a first and you know I

. I think makes the reliance argument a little tough though doesn't it. I mean that's the pitch you're making to us is there's reliance here there's reliance nobody ever relied on the code this way before ever unless you guys got a case you haven't told us about. Well we certainly would have told you about any case case your honor I think part of what's underlying the court's concern which I fully appreciate is that this would open the floodgates to abusive transactions to win falls to manipulations. I want to I want to make clear that the IRS certainly has at its disposal numerous ways to prevent abuse none of which it invoked here it didn't question the validity of the creation of the S corporation it didn't question the validity of the Q sub election it knew about all these things they were fully disclosed and fully reported. The IRS could have come in at any time and if there was a case where there were was some kind of abuse going on the IRS can come and say no that's an invalid Q sub election here the stipulation the case was tried on stipulated facts of course the stipulation was that the Q sub election was valid yeah I agree I don't think anybody's claim and then it wasn't they're claiming that you're attempt to up your basis for income you didn't declare that's where the part of the case is. I'm not sure if the case is a problem lies where you try to take a deemed transaction and illegal fiction and turn it into the basis of a you know two hundred and thirty some million dollar swing that's what I take there issue but in term we didn't declare because section thirty section three thirty two specifically says it's not to be recognized. Okay thanks very much we'll be back and we'll hear now from council for the government. Good morning I'm Francesca Ugolini council for the commissioner of internal revenue I'd like to first respond to my opposing councils argument that the commissioner hasn't addressed the regulation under 1366 in the definition of an item of income. The regulation does not define income more broadly than internal revenue code section 61 and in fact the tax payer in their opening brief concede at this point on page 29 of their brief they made the same point section 61 provides the bedrock definition of item of income for purposes of section 1366. So the regulation under 1366 does not provide any broader definition of income in six section 61 is item of income broader or narrower or the same as gross income. I think the same as gross income is gross income is the code ever defined income standing alone without a modifier like gross in front of it. No section 61 is the definition of gross income there's other parts of the code the defined taxable income which is gross income minus allowable deductions but I think in the code when the term income is used it's generally referring to gross income unless it's modified in some other way

. So we're directed essentially to section 61. So what do we make of the Supreme Court statement get lets that not all items of income are included in gross income and it's it's it's sites 1366. Well I I mean let's see 1366 I mean if you're just looking at the phrase item of income I think you're looking at what's an item of income under generally under section 61 to the extent the S court provisions narrow that in terms of what are the past through items I think 1366 can operate in a narrowing sort of way but I don't understand the Supreme Court. So I think the Supreme Court to have been saying that that something that would normally be an item of income under section 61 is is defined differently under section 1366. 1366 is really looking more at what are the separately stated items of income versus the non separately computed items of income because there's a particular way that these items get sorted out when you're figuring out how does an S corporation shareholder report these items. And so that's really the work that 1366 is doing as well as the regulations under 1366. I don't think that any of those particular rules in 1366 have been implicated in this case the question really that we're looking at and of course if this had been a recognized gain there would be no question that that would be an item of income under both section 1366 and section 61. The point in this case is that we're dealing with unrecognized gain and as the tax court held the taxpayers argument here is foreclosed by the plain and unambiguous language of section 332 which says that no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation. So the unqualified language of this provision is dispositive of this case it says no gain or loss shall be recognized respond would you to the miss Winkleman's quoting to us from Treasury Reg 1.13661 and I understood her to be saying this is just the same as what was being relied on in getlets and that far what's what's your come back. Well my the the portion of the reg that she pointed out was I guess subsection a or subsection a two little one which says the separately state of separately stated items of the S corporation income include and again this goes to this issue of separately versus non separately stated include but are not limited to the following items and she pointed out the corporations combine net amount of gains and losses from sales or exchanges of capital assets group by holding period etc etc. So the question in this case is okay is this is this a gain basically so we're back to this question of is the is the gain that was technically realized on this fictional liquidation is it an item of income under 1366. 1366 does not define income more broadly than section 61 we look at section 61 to see is this a gain that would be treated as income the regulations under section 61 specifically state that unrecognized gains are not included in or deducted from gross income. So section 61 and thereby section 1366 are speaking of recognized gains in this context it is unprecedented in the tax law to treat unrecognized gain as an item of income or as having any other collateral tax effect and that's the whole point of calling it an unrecognized gain. In this case the taxpayers argument basically is that recognition versus non recognition is just a matter of including it in your taxable income and paying tax on it but it's more than just that unrecognized means do not take it into account we ignore it that means it has no other collateral tax effects. How about realized she's they made a lot of arguments about it was realized what how does that bear a part as a technical matter it was realized only to the extent that what we've got going on here is a fictional liquidation. We're pretending that the insurance company distributed its assets up to the parent in exchange for the parent canceling its stock so you've got this fictional exchange of property under the technical provisions of the tax code that would be treated you would look at what is the amount realized less your basis in the property you've given up and and that amount would be a realized gain. So we acknowledge that as a technical matter gain has been realized no gain was realized in any economic sense whatsoever and in fact this that is what drives section 332 the reason that this is a non recognition transaction is because a Congress understood that in a 332 liquidation you have the mere removal of the corporate veil between parent and subsidiary you have purely a change in form and no change in substance. So not here's one thing I'm wrestling with here non recognition by by denotation means there's income but we're not recognizing it for tax purposes right it doesn't say it's not income it says we're not recognizing it for right now we're not recognizing it and I understand Miss Winkleman's clients to be saying the fact that she don't recognize something for some period time doesn't mean it's not income it is income and the failure to recognize it for a period doesn't make it not income. So what's wrong with that reasoning and would we be creating a lot of unforeseen problems to affirm the tax court on the broad assertion that it made that that quote non recognition provisions prevent realized gain from being included in a taxpayer's gross income. I realize that there's this sort of conceptual problem underlying the case once you're calling it unrecognized income are you then saying that it's income but we have to focus on what work what work is done by calling it unrecognized income what what's being done here is saying we are not we are going to ignore that for federal tax purposes we are not taking it into account for any federal tax purpose. So if you treat it as an item of income for purposes of 1366 you are giving it tax significance you are allowing it to increase a shareholder's basis and thereby it it is in fact becoming recognized at least for that limited purpose even if it's not being reported as gross income. So I think that's the way out of this of this sort of semantic game that's sort of going on in this case. I think one other thing to understand here I think that distinguishes this case from Gitlets is that section 332 is not an exclusion provision the way that section 108 was in the Gitlets case

. 1366 does not define income more broadly than section 61 we look at section 61 to see is this a gain that would be treated as income the regulations under section 61 specifically state that unrecognized gains are not included in or deducted from gross income. So section 61 and thereby section 1366 are speaking of recognized gains in this context it is unprecedented in the tax law to treat unrecognized gain as an item of income or as having any other collateral tax effect and that's the whole point of calling it an unrecognized gain. In this case the taxpayers argument basically is that recognition versus non recognition is just a matter of including it in your taxable income and paying tax on it but it's more than just that unrecognized means do not take it into account we ignore it that means it has no other collateral tax effects. How about realized she's they made a lot of arguments about it was realized what how does that bear a part as a technical matter it was realized only to the extent that what we've got going on here is a fictional liquidation. We're pretending that the insurance company distributed its assets up to the parent in exchange for the parent canceling its stock so you've got this fictional exchange of property under the technical provisions of the tax code that would be treated you would look at what is the amount realized less your basis in the property you've given up and and that amount would be a realized gain. So we acknowledge that as a technical matter gain has been realized no gain was realized in any economic sense whatsoever and in fact this that is what drives section 332 the reason that this is a non recognition transaction is because a Congress understood that in a 332 liquidation you have the mere removal of the corporate veil between parent and subsidiary you have purely a change in form and no change in substance. So not here's one thing I'm wrestling with here non recognition by by denotation means there's income but we're not recognizing it for tax purposes right it doesn't say it's not income it says we're not recognizing it for right now we're not recognizing it and I understand Miss Winkleman's clients to be saying the fact that she don't recognize something for some period time doesn't mean it's not income it is income and the failure to recognize it for a period doesn't make it not income. So what's wrong with that reasoning and would we be creating a lot of unforeseen problems to affirm the tax court on the broad assertion that it made that that quote non recognition provisions prevent realized gain from being included in a taxpayer's gross income. I realize that there's this sort of conceptual problem underlying the case once you're calling it unrecognized income are you then saying that it's income but we have to focus on what work what work is done by calling it unrecognized income what what's being done here is saying we are not we are going to ignore that for federal tax purposes we are not taking it into account for any federal tax purpose. So if you treat it as an item of income for purposes of 1366 you are giving it tax significance you are allowing it to increase a shareholder's basis and thereby it it is in fact becoming recognized at least for that limited purpose even if it's not being reported as gross income. So I think that's the way out of this of this sort of semantic game that's sort of going on in this case. I think one other thing to understand here I think that distinguishes this case from Gitlets is that section 332 is not an exclusion provision the way that section 108 was in the Gitlets case. It is not located in the portion of the internal revenue code that provides exclusions from income. It does not contain the language of an exclusion provision. It says no gain or loss shall be recognized. Whereas the exclusion provisions say gross income does not include dot dot dot. It also speaks in terms of a loss not being recognized and a loss is not understood as excluded from or exempt from gross income. The fourth circuit made this point in the universal leaf case in which it held that section 332 does not provide a tax exemption. And going to this point of are you are we calling it now income there's a quote in our brief from the fourth circuit the universal leaf case which says that the effective section 332 is to not recognize this as income. So that's essentially we're ignoring this for tax purposes. So what's the for our thinking it through purposes what is the distinction to be drawn if any between realized income and recognized income. In most cases in the code realized income is represented by economic income and that was even the case in Gitlets. Even though arguments were made about the shareholders shouldn't get a basis increase because there was no economic outlay there was clearly an accession to wealth by the taxpayer the S corp having its debt forgiven. There was a real economic event not correct

. It is not located in the portion of the internal revenue code that provides exclusions from income. It does not contain the language of an exclusion provision. It says no gain or loss shall be recognized. Whereas the exclusion provisions say gross income does not include dot dot dot. It also speaks in terms of a loss not being recognized and a loss is not understood as excluded from or exempt from gross income. The fourth circuit made this point in the universal leaf case in which it held that section 332 does not provide a tax exemption. And going to this point of are you are we calling it now income there's a quote in our brief from the fourth circuit the universal leaf case which says that the effective section 332 is to not recognize this as income. So that's essentially we're ignoring this for tax purposes. So what's the for our thinking it through purposes what is the distinction to be drawn if any between realized income and recognized income. In most cases in the code realized income is represented by economic income and that was even the case in Gitlets. Even though arguments were made about the shareholders shouldn't get a basis increase because there was no economic outlay there was clearly an accession to wealth by the taxpayer the S corp having its debt forgiven. There was a real economic event not correct. Correct. Correct. And in almost every case for example in in a in a liquidation that is recognized a section 331 liquidation there is an economic event. So whatever realized gain or loss is born by the taxpayer is is is reflected in some kind of economic detriment or benefit. But it's not something that is recognized for purposes. Correct. Correct. What's left of Gitlets and barley after Congress got done with it? Hopefully not much. Congress I think in that case much has been made of the fact that Congress enacted a you know a narrow the tax press have called it a narrow amendment that only addressed the issue that was in Gitlets. I don't know that the Supreme Court at the time I mean even the Supreme Court they dropped a footnote somewhere in the opinion that acknowledged that they didn't think that what was happening in Gitlets was something that was available to many taxpayers because there was a conundrum in the 108 provisions about the tax pay. So when the S court shareholders were solvent and then the corporation is insolvent and that and so they were mainly dealing with that so Congress cleaned up 108 when it after Gitlets and I think understood that it was it was taking care of Gitlets because it was always understood as providing this narrow sort of loophole. But to the extent there's any doubt in the House report Congress said that when provisions of the internal revenue code such as 108 can be understood as producing as as providing a loophole that would I don't have the exact quotas in our brief but that would further tax avoidance

. Correct. Correct. And in almost every case for example in in a in a liquidation that is recognized a section 331 liquidation there is an economic event. So whatever realized gain or loss is born by the taxpayer is is is reflected in some kind of economic detriment or benefit. But it's not something that is recognized for purposes. Correct. Correct. What's left of Gitlets and barley after Congress got done with it? Hopefully not much. Congress I think in that case much has been made of the fact that Congress enacted a you know a narrow the tax press have called it a narrow amendment that only addressed the issue that was in Gitlets. I don't know that the Supreme Court at the time I mean even the Supreme Court they dropped a footnote somewhere in the opinion that acknowledged that they didn't think that what was happening in Gitlets was something that was available to many taxpayers because there was a conundrum in the 108 provisions about the tax pay. So when the S court shareholders were solvent and then the corporation is insolvent and that and so they were mainly dealing with that so Congress cleaned up 108 when it after Gitlets and I think understood that it was it was taking care of Gitlets because it was always understood as providing this narrow sort of loophole. But to the extent there's any doubt in the House report Congress said that when provisions of the internal revenue code such as 108 can be understood as producing as as providing a loophole that would I don't have the exact quotas in our brief but that would further tax avoidance. Court should construe it as not not permitting that result. Well can we really look the law is what the law is not what somebody put in a house report right and if 331 and 332 operate the way the trust say they operate. They have as they point out every right to take advantage of that right if Congress doesn't like it they can go back in and tighten things up and say what they want to say but the commissioner can't get very far by saying hey there's a house report that says don't let them get away with it can it. I understand no and I think that's a fair point and that the commissioner's primary argument in this case is that this case is distinguishable from Gitlets because the provisions evolved are fundamentally different and the tax court made that point. We also our position is also that Gitlets shouldn't be perpetuated by the courts because of Congress's reversal of Gitlets but not so much relying on those statements in the House report but the question was what do we think is left of Gitlets even if it's not even if it doesn't dictate how courts should roll we think Congress did express in the House report that they disagree with the result in Gitlets. I just wanted to make a quick response to the revenue ruling that my opposing council referred to that came up for the first time in their reply brief so we haven't had a chance on our brief to address that and I just wanted to say that the situation in the revenue ruling 96-10 is completely different from this case. First of all it involved different code provisions it was section 267 and section 707 which govern related partnerships that sell property at a loss and under those rules in the revenue ruling a partnership sells property at a loss to another partnership and there's a real actual economic loss that gets suspended because the partnerships are related. Eventually the property gets sold outside the related group and the way these particular code sections work is to now give these partnerships the benefit of the actual suspended economic loss. And it's a real not a deemed transaction. Correct correct and there's an actual economic loss sustained and so the revenue ruling steps in to provide a rule that otherwise might not be allowed under the code it says in this instance we are going to let you increase your basis by the amount of the suspended loss which is the same as the unwritten. So we are going to recognize gain in the later sale so that the partners do finally get to take the benefit of this actual economic loss that was suspended under these other code provisions that's clearly not what's going on in this case. And I think the revenue ruling actually reinforces that under a plane reading of the code you would not use unrecognized gain or loss to affect your basis at all

. Court should construe it as not not permitting that result. Well can we really look the law is what the law is not what somebody put in a house report right and if 331 and 332 operate the way the trust say they operate. They have as they point out every right to take advantage of that right if Congress doesn't like it they can go back in and tighten things up and say what they want to say but the commissioner can't get very far by saying hey there's a house report that says don't let them get away with it can it. I understand no and I think that's a fair point and that the commissioner's primary argument in this case is that this case is distinguishable from Gitlets because the provisions evolved are fundamentally different and the tax court made that point. We also our position is also that Gitlets shouldn't be perpetuated by the courts because of Congress's reversal of Gitlets but not so much relying on those statements in the House report but the question was what do we think is left of Gitlets even if it's not even if it doesn't dictate how courts should roll we think Congress did express in the House report that they disagree with the result in Gitlets. I just wanted to make a quick response to the revenue ruling that my opposing council referred to that came up for the first time in their reply brief so we haven't had a chance on our brief to address that and I just wanted to say that the situation in the revenue ruling 96-10 is completely different from this case. First of all it involved different code provisions it was section 267 and section 707 which govern related partnerships that sell property at a loss and under those rules in the revenue ruling a partnership sells property at a loss to another partnership and there's a real actual economic loss that gets suspended because the partnerships are related. Eventually the property gets sold outside the related group and the way these particular code sections work is to now give these partnerships the benefit of the actual suspended economic loss. And it's a real not a deemed transaction. Correct correct and there's an actual economic loss sustained and so the revenue ruling steps in to provide a rule that otherwise might not be allowed under the code it says in this instance we are going to let you increase your basis by the amount of the suspended loss which is the same as the unwritten. So we are going to recognize gain in the later sale so that the partners do finally get to take the benefit of this actual economic loss that was suspended under these other code provisions that's clearly not what's going on in this case. And I think the revenue ruling actually reinforces that under a plane reading of the code you would not use unrecognized gain or loss to affect your basis at all. That is why the IRS issued the ruling in this case to step in and provide an equitable policy based rule in the 96-10 to preserve the intent of the statues. Unless the court has any further questions. Thank you. Thank you. Is Winkler? Thank you, Your Honours. Just a few reactions. One, on this issue of why didn't anyone else think of this if it was so obvious I guess the same could have been said prior to the Getlets Farley line of cases. And this court was very clear. Judge Roth was very clear that in her holding in that case that we are aware that the result reached today and interpreting the relevant statutory language may not have been the result intended. We are not free to disregard the clear and controlling language. We are more concerned about the unintended consequences of our ruling in this matter. I think it was expressed that would we be opening the floodgates

. That is why the IRS issued the ruling in this case to step in and provide an equitable policy based rule in the 96-10 to preserve the intent of the statues. Unless the court has any further questions. Thank you. Thank you. Is Winkler? Thank you, Your Honours. Just a few reactions. One, on this issue of why didn't anyone else think of this if it was so obvious I guess the same could have been said prior to the Getlets Farley line of cases. And this court was very clear. Judge Roth was very clear that in her holding in that case that we are aware that the result reached today and interpreting the relevant statutory language may not have been the result intended. We are not free to disregard the clear and controlling language. We are more concerned about the unintended consequences of our ruling in this matter. I think it was expressed that would we be opening the floodgates. That is one of the paramot thoughts in any ruling that a circuit court judge has to make. Absolutely. And Judge Roth was concerned about that too and said if Congress has a problem with this Congress can amend it here even more so though. 108, D7A. That was in the code as an exclusion. The court was prepared to say it says what it says. Here, I guess we are grappling with, you say the code here and the regs are plain on this point but how do you square up the word, a word like deemed which seems to indicate that the code is recognizing and telling tax practitioners and judges that this is not a real transaction. This is a legal fiction. How do you get around words like that and say it is plain that this should be treated as if it were an economic transaction of economic substance in the same way that a forgiveness of debt was in Farley. The deemed liquidation is not a fiction. It is a real event. The parent realizes gain on its investment

. That is one of the paramot thoughts in any ruling that a circuit court judge has to make. Absolutely. And Judge Roth was concerned about that too and said if Congress has a problem with this Congress can amend it here even more so though. 108, D7A. That was in the code as an exclusion. The court was prepared to say it says what it says. Here, I guess we are grappling with, you say the code here and the regs are plain on this point but how do you square up the word, a word like deemed which seems to indicate that the code is recognizing and telling tax practitioners and judges that this is not a real transaction. This is a legal fiction. How do you get around words like that and say it is plain that this should be treated as if it were an economic transaction of economic substance in the same way that a forgiveness of debt was in Farley. The deemed liquidation is not a fiction. It is a real event. The parent realizes gain on its investment. There is no real liquidation. You treat it as if it is a liquidation. Nobody goes out and sells a stock. You take that and you treat it as if that is my mistaken. That is correct, Your Honor. The way that 332 and 1366 work together is the gain on the deemed liquidation is not recognized and just to get back to the realization versus recognition which is one of I think the most startling aspects of the tax court's opinion. Realization is when the gain could be taxed. Recognition is when it actually is taxed. 332 says that this deemed liquidation, the gain is not recognized. 1366 says items of income and the regulation then defines what those are flow through to the shareholders. I am very clear that the court may not like the result. It would not open the floodgates, Your Honor, because if there was a problem with the valuation, if there was a problem with the Q sub-election, here there was 3

. There is no real liquidation. You treat it as if it is a liquidation. Nobody goes out and sells a stock. You take that and you treat it as if that is my mistaken. That is correct, Your Honor. The way that 332 and 1366 work together is the gain on the deemed liquidation is not recognized and just to get back to the realization versus recognition which is one of I think the most startling aspects of the tax court's opinion. Realization is when the gain could be taxed. Recognition is when it actually is taxed. 332 says that this deemed liquidation, the gain is not recognized. 1366 says items of income and the regulation then defines what those are flow through to the shareholders. I am very clear that the court may not like the result. It would not open the floodgates, Your Honor, because if there was a problem with the valuation, if there was a problem with the Q sub-election, here there was 3.5 years between the two. That is not the point, right? When you say it would not open the floodgates, why would every wealthy individual with the capacity to set up an S corporation not do exactly what your clients did and turn their hundreds of millions of dollars in gain? If this is the law, why is it not just an open invitation? I guess if I was standing here arguing before this court in Farley, I would have answered the question, the way the court ended up answering the question. It is not our job and if Congress does not like it, just like it amended 108 after Gitlets, it could amend 1366, it could amend 332, but it hasn't. It didn't and our clients were entitled to rely on what on the result that was produced. Thank you very much for your argument as well argued on both sides. We appreciate Council's time to take the matter under advisement and recess court. We have to do to get this through this court. Thank you, good point. We would like to have Council arrange to have a transcript of this. This is a sufficiently technical area that it would be helpful to have this argument in print. Thank you. That's all right

.5 years between the two. That is not the point, right? When you say it would not open the floodgates, why would every wealthy individual with the capacity to set up an S corporation not do exactly what your clients did and turn their hundreds of millions of dollars in gain? If this is the law, why is it not just an open invitation? I guess if I was standing here arguing before this court in Farley, I would have answered the question, the way the court ended up answering the question. It is not our job and if Congress does not like it, just like it amended 108 after Gitlets, it could amend 1366, it could amend 332, but it hasn't. It didn't and our clients were entitled to rely on what on the result that was produced. Thank you very much for your argument as well argued on both sides. We appreciate Council's time to take the matter under advisement and recess court. We have to do to get this through this court. Thank you, good point. We would like to have Council arrange to have a transcript of this. This is a sufficiently technical area that it would be helpful to have this argument in print. Thank you. That's all right. Thank you. Thank you. Thank you. Thank you.

All right, thank you, council. We'll call our next case. Ms. Winkleman. Two have to adjust the mic just a little bit. Good morning, Your Honors. My name is Nancy Winkleman. I'm here on behalf of the Appellants, along with my co-council at Council Table Jerry Riesel. The issue presented to this court is an hour one. The briefs have, I believe, crystallized that issue. The question is whether the gain that all agree when River realized and did not recognize on the deemed liquidation of the subsidiary is an item of income that passes through to the shareholders under 1366. And it doesn't define 1366 does not define item of income does it? Well, actually, Your Honor, that's an interesting question because the regulation, 1366, itself does not define item of income. But the regulation, which we quote in our brief and our reply brief, but the commissioner has not responded to regulation 1.1366182. And it's at pages 21 through 23 of our opening brief and page 12 of our reply brief. In fact, does define item of income and includes in that definition this very type of income, quote, the corporations combine net amount of gains or losses from the sales or exchanges of capital assets. And it's a very important point because one of the key themes of this case stepping back is that taxpayers should be permitted. In fact, are allowed, are encouraged to rely, must be able to rely in planning their conduct on the plain language of the code, of the regulations. And here we have we've been- So, if this is so plain, why aren't people all over America saying, hey, you know what, instead of paying two, paying taxes on $200 million with the aggregate gain, why don't we end up claiming a $12 million loss by engaging in a Q sub-election and upping a basis when we don't declare income on our reports. It seems like an awfully attractive option. And if it's really all that plain that that's what the code allows, one would think that wealthy folks all over America would be doing it. But you seem to agree that this is a matter of first impression. Is that right? Putting aside the principles that were established and getlets and farly, which we briefed extensively, both parties did, that's correct, Your Honor. And I can't speak to other individuals what I can speak to, though, is- It does make it seem like it's a little less plain than you're saying, though, doesn't it? Let me walk through the provisions that collectively lead to the result that we encourage the court to find here. And start with where Judge Antwerpon started. What is an item of income under Section 1366 of the code? And you would agree also that the code supersedes regulations. You can't have regulations that are inconsistent with the code. That's correct, Your Honor. And there's nothing inconsistent. The regulation defines what item of income is. And the commissioners own revenue ruling, which I think- How about internal revenue code section 331 and 332? They do not recognize corporate litigation gains as income, do they? Your Honor, Section 332 provides that this type of gain is not recognized. And that's key. That's key to the taxpayer's position here. Just because it's not recognized doesn't mean that it's not an item of income. You look to 1366, you look to the regulation, and very importantly, in terms of taxpayers being able to rely on the code and what the IRS itself has said, you look to the commissioners own revenue ruling, which we cite on pages 8-9 of our reply brief, which is in what the commissioner agrees is an analogous context, the partnership context, in terms of the pass-through element of S corporations. And get listen for, they didn't really involve payments for an indebtedness. That's absolutely correct, Your Honor. Which is somewhat different than the situation here, isn't it? It's different in some respects, but in terms of what the key respect- Because they're specifically designated as gross income under 61a, right? Well, actually the cancellation of indebtedness income at issue in Get Listen Farley section was Section 108, which said- In 108, it said cancellation of indebtedness is income specifically in the statute. Do you have anything that's akin to that in any statute in this case? Let me try two responses to these questions. The provision at issue in Get Listen Farley section 108 said gross income does not include. The regulation that the commissioner relies on here section 1.616 uses virtually identical language gains on the sale or exchange of property are not recognized. That is, are not included. It's the same scenario. Well, when you say it's the same scenario, certainly counsel for the government will be up here in a minute and speak for themselves. But isn't the pitch that's being made to us that this isn't a sale of property? This is deemed to be a liquidation. But that's a legal fiction for tax purposes. There isn't a sale of property here. And to act as if there were a sale of property here is to take that legal fiction and twist and turn it into something that could be the subject of tremendous abuse. Like people declaring $200 million worth of income to be a $12 million loss. Don't let them turn a fiction into something that's not. That's the tenor of what I understand. That's an argument I'd like you to respond to. And I agree completely that that's the tenor. And the response is really what the IRS is talking about is more is the policy. This Court made clear in Farley as Judge Roth said, emphasized that this Court's job is not to reach a result of deemed fair to make tax policy. It's to interpret the statute. And in fact, Section 332 works both ways. It could have worked to the taxpayers disadvantage here. It happened to work to the taxpayers advantage. But the government also discusses how it could work the other way. That's only if one accepts your premise about how 331 and 332 operate. I mean, one has to accept your assertion that this is an item of income. And it is immediately realized in order to get to the point you want to get. And they deny that's the case. And the reason I understand they deny it is because of what we've just been through. This is not a sale property. There's nothing that actually happened there. And you can't treat it as if it is. And it's different from Farley and Gitlett's because 108.7 is included something in the statute and this doesn't. So you're pushed back on that. I understand it is. Well, the reg says something like that. But do you have anything else besides that to point out that they are reasoning is fault that it's flawed? Well, the starting point 61 a 3 includes this type of gain. It identifies this type of gain as income. And then 1366 says it's an item of income and the regulation says in fact this specific gain is exactly what we're talking about. It doesn't define item of income. Does it. The regulation your honor. How about 1.61-61? Doesn't that interpret gross income as not including unrecognized gains? And we take no we don't we take no issue with that. That's not that we don't view that as a problem because what we know from Gitlett's and Farley is that income that is not included in gross income can still be an item of income under 1366. I want to just mention because I think it's important on this policy point. And I also have a problem with the idea of gaining, well, I guess it isn't 230. It's $214 million you gain. And the only thing you have to do is take a $12 million loss. That's an amazing section of the code. I'll keep that in mind for next April. It could work both ways. There's certainly nothing wrong with taxpayers minimizing the amount of tax they pay learned in hand has a as a oft quoted statement. There's nothing sinister in arranging ones affairs to keep taxes as low as possible. Sure, but if this were income, it's just it's just remarkable to me that the tax payers here are are taking the position that it's it's income realized. And we don't have any problem with being called unrecognized, but we don't have to put it on we don't have to report it as income. We just get the benefit of bumping our bases by it so we can declare a loss. Let me ask you this question. Is there is there anything to be learned of the government makes a point of saying hey after Farley Gitlett's Congress went in and made it clear they didn't like that outcome. I made it abundantly clear that they thought that was a wrong outcome and not sort of thing to be repeated. Should we draw the conclusion they ask us to draw from that or does that send us out into the land that Farley said don't go into. I think that's exactly the problem. I think that if one takes from the legislative history that the commissioner relies on, basically tax planning all bets are off. Tax pay or read something in the code read something in the regulation read something in the commissioners own revenue ruling that we talk about that in the partnership concept context says that realized unrecognized gain is income. And it requires the taxpayers to increase their bases. The taxpayers are entitled to rely on the code regulations, the commissioners. But nobody ever before you guys read the code this way it seems like there's the commissioner the tax court judge made a point of saying they never cited a case to me and I haven't found one. We've been looking we haven't found one. Nobody in the United States of America has ever read the code the way your clients have not read the code. So how far do you get with the argument that they're entitled to rely on the code when nobody seems to have seen this in the code before now. There are there isn't a case one way or the other there are often is a first and you know I. I think makes the reliance argument a little tough though doesn't it. I mean that's the pitch you're making to us is there's reliance here there's reliance nobody ever relied on the code this way before ever unless you guys got a case you haven't told us about. Well we certainly would have told you about any case case your honor I think part of what's underlying the court's concern which I fully appreciate is that this would open the floodgates to abusive transactions to win falls to manipulations. I want to I want to make clear that the IRS certainly has at its disposal numerous ways to prevent abuse none of which it invoked here it didn't question the validity of the creation of the S corporation it didn't question the validity of the Q sub election it knew about all these things they were fully disclosed and fully reported. The IRS could have come in at any time and if there was a case where there were was some kind of abuse going on the IRS can come and say no that's an invalid Q sub election here the stipulation the case was tried on stipulated facts of course the stipulation was that the Q sub election was valid yeah I agree I don't think anybody's claim and then it wasn't they're claiming that you're attempt to up your basis for income you didn't declare that's where the part of the case is. I'm not sure if the case is a problem lies where you try to take a deemed transaction and illegal fiction and turn it into the basis of a you know two hundred and thirty some million dollar swing that's what I take there issue but in term we didn't declare because section thirty section three thirty two specifically says it's not to be recognized. Okay thanks very much we'll be back and we'll hear now from council for the government. Good morning I'm Francesca Ugolini council for the commissioner of internal revenue I'd like to first respond to my opposing councils argument that the commissioner hasn't addressed the regulation under 1366 in the definition of an item of income. The regulation does not define income more broadly than internal revenue code section 61 and in fact the tax payer in their opening brief concede at this point on page 29 of their brief they made the same point section 61 provides the bedrock definition of item of income for purposes of section 1366. So the regulation under 1366 does not provide any broader definition of income in six section 61 is item of income broader or narrower or the same as gross income. I think the same as gross income is gross income is the code ever defined income standing alone without a modifier like gross in front of it. No section 61 is the definition of gross income there's other parts of the code the defined taxable income which is gross income minus allowable deductions but I think in the code when the term income is used it's generally referring to gross income unless it's modified in some other way. So we're directed essentially to section 61. So what do we make of the Supreme Court statement get lets that not all items of income are included in gross income and it's it's it's sites 1366. Well I I mean let's see 1366 I mean if you're just looking at the phrase item of income I think you're looking at what's an item of income under generally under section 61 to the extent the S court provisions narrow that in terms of what are the past through items I think 1366 can operate in a narrowing sort of way but I don't understand the Supreme Court. So I think the Supreme Court to have been saying that that something that would normally be an item of income under section 61 is is defined differently under section 1366. 1366 is really looking more at what are the separately stated items of income versus the non separately computed items of income because there's a particular way that these items get sorted out when you're figuring out how does an S corporation shareholder report these items. And so that's really the work that 1366 is doing as well as the regulations under 1366. I don't think that any of those particular rules in 1366 have been implicated in this case the question really that we're looking at and of course if this had been a recognized gain there would be no question that that would be an item of income under both section 1366 and section 61. The point in this case is that we're dealing with unrecognized gain and as the tax court held the taxpayers argument here is foreclosed by the plain and unambiguous language of section 332 which says that no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation. So the unqualified language of this provision is dispositive of this case it says no gain or loss shall be recognized respond would you to the miss Winkleman's quoting to us from Treasury Reg 1.13661 and I understood her to be saying this is just the same as what was being relied on in getlets and that far what's what's your come back. Well my the the portion of the reg that she pointed out was I guess subsection a or subsection a two little one which says the separately state of separately stated items of the S corporation income include and again this goes to this issue of separately versus non separately stated include but are not limited to the following items and she pointed out the corporations combine net amount of gains and losses from sales or exchanges of capital assets group by holding period etc etc. So the question in this case is okay is this is this a gain basically so we're back to this question of is the is the gain that was technically realized on this fictional liquidation is it an item of income under 1366. 1366 does not define income more broadly than section 61 we look at section 61 to see is this a gain that would be treated as income the regulations under section 61 specifically state that unrecognized gains are not included in or deducted from gross income. So section 61 and thereby section 1366 are speaking of recognized gains in this context it is unprecedented in the tax law to treat unrecognized gain as an item of income or as having any other collateral tax effect and that's the whole point of calling it an unrecognized gain. In this case the taxpayers argument basically is that recognition versus non recognition is just a matter of including it in your taxable income and paying tax on it but it's more than just that unrecognized means do not take it into account we ignore it that means it has no other collateral tax effects. How about realized she's they made a lot of arguments about it was realized what how does that bear a part as a technical matter it was realized only to the extent that what we've got going on here is a fictional liquidation. We're pretending that the insurance company distributed its assets up to the parent in exchange for the parent canceling its stock so you've got this fictional exchange of property under the technical provisions of the tax code that would be treated you would look at what is the amount realized less your basis in the property you've given up and and that amount would be a realized gain. So we acknowledge that as a technical matter gain has been realized no gain was realized in any economic sense whatsoever and in fact this that is what drives section 332 the reason that this is a non recognition transaction is because a Congress understood that in a 332 liquidation you have the mere removal of the corporate veil between parent and subsidiary you have purely a change in form and no change in substance. So not here's one thing I'm wrestling with here non recognition by by denotation means there's income but we're not recognizing it for tax purposes right it doesn't say it's not income it says we're not recognizing it for right now we're not recognizing it and I understand Miss Winkleman's clients to be saying the fact that she don't recognize something for some period time doesn't mean it's not income it is income and the failure to recognize it for a period doesn't make it not income. So what's wrong with that reasoning and would we be creating a lot of unforeseen problems to affirm the tax court on the broad assertion that it made that that quote non recognition provisions prevent realized gain from being included in a taxpayer's gross income. I realize that there's this sort of conceptual problem underlying the case once you're calling it unrecognized income are you then saying that it's income but we have to focus on what work what work is done by calling it unrecognized income what what's being done here is saying we are not we are going to ignore that for federal tax purposes we are not taking it into account for any federal tax purpose. So if you treat it as an item of income for purposes of 1366 you are giving it tax significance you are allowing it to increase a shareholder's basis and thereby it it is in fact becoming recognized at least for that limited purpose even if it's not being reported as gross income. So I think that's the way out of this of this sort of semantic game that's sort of going on in this case. I think one other thing to understand here I think that distinguishes this case from Gitlets is that section 332 is not an exclusion provision the way that section 108 was in the Gitlets case. It is not located in the portion of the internal revenue code that provides exclusions from income. It does not contain the language of an exclusion provision. It says no gain or loss shall be recognized. Whereas the exclusion provisions say gross income does not include dot dot dot. It also speaks in terms of a loss not being recognized and a loss is not understood as excluded from or exempt from gross income. The fourth circuit made this point in the universal leaf case in which it held that section 332 does not provide a tax exemption. And going to this point of are you are we calling it now income there's a quote in our brief from the fourth circuit the universal leaf case which says that the effective section 332 is to not recognize this as income. So that's essentially we're ignoring this for tax purposes. So what's the for our thinking it through purposes what is the distinction to be drawn if any between realized income and recognized income. In most cases in the code realized income is represented by economic income and that was even the case in Gitlets. Even though arguments were made about the shareholders shouldn't get a basis increase because there was no economic outlay there was clearly an accession to wealth by the taxpayer the S corp having its debt forgiven. There was a real economic event not correct. Correct. Correct. And in almost every case for example in in a in a liquidation that is recognized a section 331 liquidation there is an economic event. So whatever realized gain or loss is born by the taxpayer is is is reflected in some kind of economic detriment or benefit. But it's not something that is recognized for purposes. Correct. Correct. What's left of Gitlets and barley after Congress got done with it? Hopefully not much. Congress I think in that case much has been made of the fact that Congress enacted a you know a narrow the tax press have called it a narrow amendment that only addressed the issue that was in Gitlets. I don't know that the Supreme Court at the time I mean even the Supreme Court they dropped a footnote somewhere in the opinion that acknowledged that they didn't think that what was happening in Gitlets was something that was available to many taxpayers because there was a conundrum in the 108 provisions about the tax pay. So when the S court shareholders were solvent and then the corporation is insolvent and that and so they were mainly dealing with that so Congress cleaned up 108 when it after Gitlets and I think understood that it was it was taking care of Gitlets because it was always understood as providing this narrow sort of loophole. But to the extent there's any doubt in the House report Congress said that when provisions of the internal revenue code such as 108 can be understood as producing as as providing a loophole that would I don't have the exact quotas in our brief but that would further tax avoidance. Court should construe it as not not permitting that result. Well can we really look the law is what the law is not what somebody put in a house report right and if 331 and 332 operate the way the trust say they operate. They have as they point out every right to take advantage of that right if Congress doesn't like it they can go back in and tighten things up and say what they want to say but the commissioner can't get very far by saying hey there's a house report that says don't let them get away with it can it. I understand no and I think that's a fair point and that the commissioner's primary argument in this case is that this case is distinguishable from Gitlets because the provisions evolved are fundamentally different and the tax court made that point. We also our position is also that Gitlets shouldn't be perpetuated by the courts because of Congress's reversal of Gitlets but not so much relying on those statements in the House report but the question was what do we think is left of Gitlets even if it's not even if it doesn't dictate how courts should roll we think Congress did express in the House report that they disagree with the result in Gitlets. I just wanted to make a quick response to the revenue ruling that my opposing council referred to that came up for the first time in their reply brief so we haven't had a chance on our brief to address that and I just wanted to say that the situation in the revenue ruling 96-10 is completely different from this case. First of all it involved different code provisions it was section 267 and section 707 which govern related partnerships that sell property at a loss and under those rules in the revenue ruling a partnership sells property at a loss to another partnership and there's a real actual economic loss that gets suspended because the partnerships are related. Eventually the property gets sold outside the related group and the way these particular code sections work is to now give these partnerships the benefit of the actual suspended economic loss. And it's a real not a deemed transaction. Correct correct and there's an actual economic loss sustained and so the revenue ruling steps in to provide a rule that otherwise might not be allowed under the code it says in this instance we are going to let you increase your basis by the amount of the suspended loss which is the same as the unwritten. So we are going to recognize gain in the later sale so that the partners do finally get to take the benefit of this actual economic loss that was suspended under these other code provisions that's clearly not what's going on in this case. And I think the revenue ruling actually reinforces that under a plane reading of the code you would not use unrecognized gain or loss to affect your basis at all. That is why the IRS issued the ruling in this case to step in and provide an equitable policy based rule in the 96-10 to preserve the intent of the statues. Unless the court has any further questions. Thank you. Thank you. Is Winkler? Thank you, Your Honours. Just a few reactions. One, on this issue of why didn't anyone else think of this if it was so obvious I guess the same could have been said prior to the Getlets Farley line of cases. And this court was very clear. Judge Roth was very clear that in her holding in that case that we are aware that the result reached today and interpreting the relevant statutory language may not have been the result intended. We are not free to disregard the clear and controlling language. We are more concerned about the unintended consequences of our ruling in this matter. I think it was expressed that would we be opening the floodgates. That is one of the paramot thoughts in any ruling that a circuit court judge has to make. Absolutely. And Judge Roth was concerned about that too and said if Congress has a problem with this Congress can amend it here even more so though. 108, D7A. That was in the code as an exclusion. The court was prepared to say it says what it says. Here, I guess we are grappling with, you say the code here and the regs are plain on this point but how do you square up the word, a word like deemed which seems to indicate that the code is recognizing and telling tax practitioners and judges that this is not a real transaction. This is a legal fiction. How do you get around words like that and say it is plain that this should be treated as if it were an economic transaction of economic substance in the same way that a forgiveness of debt was in Farley. The deemed liquidation is not a fiction. It is a real event. The parent realizes gain on its investment. There is no real liquidation. You treat it as if it is a liquidation. Nobody goes out and sells a stock. You take that and you treat it as if that is my mistaken. That is correct, Your Honor. The way that 332 and 1366 work together is the gain on the deemed liquidation is not recognized and just to get back to the realization versus recognition which is one of I think the most startling aspects of the tax court's opinion. Realization is when the gain could be taxed. Recognition is when it actually is taxed. 332 says that this deemed liquidation, the gain is not recognized. 1366 says items of income and the regulation then defines what those are flow through to the shareholders. I am very clear that the court may not like the result. It would not open the floodgates, Your Honor, because if there was a problem with the valuation, if there was a problem with the Q sub-election, here there was 3.5 years between the two. That is not the point, right? When you say it would not open the floodgates, why would every wealthy individual with the capacity to set up an S corporation not do exactly what your clients did and turn their hundreds of millions of dollars in gain? If this is the law, why is it not just an open invitation? I guess if I was standing here arguing before this court in Farley, I would have answered the question, the way the court ended up answering the question. It is not our job and if Congress does not like it, just like it amended 108 after Gitlets, it could amend 1366, it could amend 332, but it hasn't. It didn't and our clients were entitled to rely on what on the result that was produced. Thank you very much for your argument as well argued on both sides. We appreciate Council's time to take the matter under advisement and recess court. We have to do to get this through this court. Thank you, good point. We would like to have Council arrange to have a transcript of this. This is a sufficiently technical area that it would be helpful to have this argument in print. Thank you. That's all right. Thank you. Thank you. Thank you. Thank you