- 30 -
267(f). We think what Congress intended to "extend" was the
class of transaction in which there would be a delay, of some
kind, in the recognition of a loss until there was an
economically genuine realization of the loss. See McWilliams v.
Commissioner, 331 U.S. 694 (1947); Hassen v. Commissioner, 599
F.2d 305, 309 (9th Cir. 1979), affg. 63 T.C. 175 (1974).
It is clear from the legislative history that the
consolidated return rules were to be applied where controlled
corporations filed consolidated returns. The Tracinda Group did
not file consolidated returns that included MGM during the
relevant periods. The statute itself provides that a deferred
loss of a member of a controlled group would be "deferred until
the property is transferred outside such controlled group and
there would be recognition of loss under consolidated return
principles or until such other time as may be prescribed in
regulations." Sec. 267(f)(2)(B). The property (UA stock) was
not transferred out of the Tracinda Group as a result of the
March 25, 1986, transactions. Rather, MGM, the selling member,
left the controlled group on that date. We therefore turn to the
1984 temporary regulation, in effect for the years in issue,
which was applicable to controlled groups' not filing a
consolidated return.26
26A separate temporary regulation was promulgated for
companies in a controlled group that filed consolidated returns.
See sec. 1.267(f)-2T, Temporary Income Tax Regs., 49 Fed. Reg.
(continued...)
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