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its controlled group in 1988.1 This question turns on the
validity of section 1.267(f)-1T(c)(6), Temporary Income Tax
Regs., 49 Fed. Reg. 46998 (Nov. 30, 1984), and the application of
section 7805(b).
The parties submitted this case fully stipulated in
accordance with Rule 122. The stipulation of facts is
incorporated herein by this reference.
FINDINGS OF FACT
Petitioner is a California corporation, with its principal
office in San Francisco, California. As described in more detail
below, in 1984 petitioner belonged to a controlled group of
corporations that included its indirect United Kingdom parent
corporation.2 In 1984, petitioner sold a loan portfolio to its
indirect United Kingdom parent corporation, realizing a loss of
$87.9 million. Respondent determined that petitioner was
permitted to deduct $2.3 million of the losses in taxable year
1984, but pursuant to section 267(f) was required to defer
additional losses associated with the sale. In 1988, petitioner
left the controlled group, which still held the loan portfolio.
1 All section references are to the Internal Revenue Code
in effect for the taxable year in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
2 Unless otherwise specified, references to petitioner
include references to petitioner’s predecessor in interest, Union
Bank.
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