Unionbancal Corporation - Page 3

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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           

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