Unionbancal Corporation - Page 5

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          The 1984 Sale of the Loan Portfolio                                         
               On December 31, 1984, Union Bank sold to Standard Chartered-           
          U.K. loans that it had made to various foreign countries (the               
          loan portfolio).  The sales price was $422,985,520.  The face               
          value of the loan portfolio was $434,557,415.                               
               On October 31, 1988, when SCOH sold all its stock in                   
          Standard Chartered to California First Bank, the loan portfolio             
          had not been disposed of outside of the controlled group.                   
          Standard Chartered-U.K. transferred the loan portfolio outside of           
          the controlled group in 1989.                                               
          Tax Treatment of the Loan Portfolio Sale for Taxable Year 1984              
               On its 1984 corporate Federal income tax return, petitioner            
          claimed a loss of $11,571,895 in connection with the sale of the            
          loan portfolio, corresponding to the difference between                     
          petitioner’s basis in the loan portfolio ($434,557,415) and the             
          sales price ($422,985,520).  In 1995, in the course of                      
          respondent’s Appeals Office review of the audit determinations              
          for the 1984 taxable year, petitioner filed an amended Federal              
          income tax return for its 1984 taxable year, claiming a revised             
          loss of $84,079,067 on the sale of the loan portfolio to Standard           
          Chartered-U.K.  Respondent denied this affirmative adjustment.              
               Petitioner and respondent reached a partial appeals                    
          settlement for taxable year 1984, under which respondent allowed            
          petitioner a loss deduction in 1984 in the amount of $2,314,379,            

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