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return regulations, the UA Sale would not be covered because
immediately after the completion of the sale the parties were not
members of the same controlled group.
Respondent argues that paragraph (c)(6) and (7) of the 1984
temporary regulation constitutes exceptions to the application of
section 1.1502-13, Income Tax Regs., of the consolidated return
regulations. This is partly true; however, the exception is to
the "restoration" of loss rule in section 1.1502-13(f)(1)(iii),
Income Tax Regs. Section 1.1502-13(f)(1)(iii), Income Tax Regs.,
deals with the situation of a selling member that leaves the
controlled group after having engaged in a deferred intercompany
transaction. But when there has been no deferred intercompany
transaction, as defined in section 1.1502-13(a), Income Tax
Regs., paragraph (f)(1)(iii) has no application, and it follows
that the exception to paragraph (f)(1)(iii) contained in
paragraph (c)(6) and (7) of the 1984 temporary regulation also
has no application.
After considering the overall regulatory context and the
specific language used in paragraph (c)(6) and (7) of the 1984
temporary regulation, we conclude that paragraph (c)(6) and (7)
does not apply to the UA Sale, which was part of the overall
transaction that simultaneously ended the controlled group
relationship and transferred the UA shares to Tracinda. The fact
pattern that is dealt with in paragraph (c)(6) and (7) of the
1984 temporary regulation assumes that an intercompany
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