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Section 267(f) prescribes special rules for losses incurred
on the sale or exchange of property between related taxpayers
that are members of the same controlled group.6 Section 267(f)(2)
provides:
(2) Deferral (rather than denial) of loss from sale or
exchange between members.--In the case of any loss from the
sale or exchange of property which is between members of the
same controlled group and to which subsection (a)(1) applies
(determined without regard to this paragraph but with regard
to paragraph (3))--
(A) subsections (a)(1) and (d) shall not
apply to such loss, but
(B) such loss shall be deferred until the property
is transferred outside such controlled group and there
would be recognition of loss under consolidated return
principles or until such other time as may be
prescribed in regulations.
5(...continued)
the taxpayer a loss sustained by the transferor is not
allowable to the transferor as a deduction by reason of
subsection (a)(1) * * *; and
(2) * * * the taxpayer sells or otherwise disposes of
such property * * * at a gain,
then such gain shall be recognized only to the extent that
it exceeds so much of such loss as is properly allocable to
the property sold or otherwise disposed of by the taxpayer.
* * *
6 For this purpose, a controlled group is determined under
the rules provided in sec. 1563(a), except that stock ownership
of more than 50 percent is substituted for the requirement in
sec. 1563 for stock ownership of at least 80 percent. See sec.
267(f)(1). It is undisputed that Standard Chartered-U.K. and
Union Bank were part of the same controlled group at the time of
the sale of the loan portfolio and immediately thereafter. Cf.
Turner Broad. Sys., Inc. & Subs. v. Commissioner, 111 T.C. 315,
329-338 (1998).
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Last modified: May 25, 2011