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The 1984 temporary regulation provides in relevant part:
(c) Deferral and restoration of loss under
consolidated returns principles--(1) General rule. Except
as otherwise provided in this section, the rules for
deferred intercompany transactions in � 1.1502-13 of the
consolidated return regulations apply under section
267(f)(2) to the deferral and restoration of loss on the
sale of property directly or indirectly between M1 and M2 as
if--
(i) the taxable year in which the sale
occurred were a consolidated return year (as
defined in � 1.1502-1(d)) and
(ii) all references to a "group" or an
"affiliated group" were to a controlled
group.
* * * * * * *
(6) Exception to restoration rule for selling member
that ceases to be a member. If a selling member of property
[sic] for which loss has been deferred ceases to be a member
when the property is still owned by another member, then,
for purposes of this section, � 1.1502-13(f)(1)(iii)[27]
26(...continued)
46997 (Nov. 30, 1984).
27Sec. 1.1502-13(f)(1)(iii), Income Tax Regs., 38 Fed. Reg.
758 (June 4, 1973), at the relevant time provided:
(f) Restoration of deferred gain or loss on
dispositions, etc.--(1) General rule. The remaining
balance (after taking into account any prior reductions
under paragraphs (d)(3) and (e)(3) of this section) of
the deferred gain or loss attributable to property,
services, or other expenditure shall be taken into
account by the selling member as of the earliest of
the following dates:
* * * * * * *
(iii) Immediately preceding the time
(continued...)
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