- 35 -
transaction has occurred before the selling member leaves the
controlled group. The paragraph talks of a loss that "has been
deferred". It also refers to property "still owned" when the
selling member departs the group and of an "unrestored deferred
loss". We give effect to the use of the past tense in the 1984
temporary regulation. In other words, before paragraph (c)(6)
and (7) of the 1984 temporary regulation become operative, the
loss must have been deferred as an "intercompany transaction"
prior to the dissociation of the seller from the controlled
group.28 The preamble to the 1984 temporary regulation adds
additional weight to this interpretation. It states in relevant
part:
Accordingly, the temporary regulations provide that if
a member (M1) sells property to another member (M2),
and thereafter, while M2 still holds the property, M1
ceases to be a member of the group, then M1's
unrestored deferred loss for property at the time M1
ceases to be a member will never be restored to M1.
* * * [T.D. 7991, 1985-1 C.B. 71, 73; emphasis added.]
The MGM Purchase and UA Sale occurred simultaneously.
Immediately after the transaction, MGM was not a member of the
controlled group that included Tracinda. As a consequence, there
28We note this is the same view as is expressed by the
authors of 1 Dubroff et al., Federal Income Taxation of
Corporations Filing Consolidated Returns, sec. 31.11[6], at 31-
246 (2d ed. 1998), stating: "The fact pattern addressed by the
prior regulations [the 1984 temporary regulation] involved an
intercompany sale at a loss followed by * * * [Seller] leaving
the group." (Emphasis added.)
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011