- 18 -
basis adjustment that applies without regard to whether the loss
property is subsequently resold at a gain or loss.
2. Does the Temporary Regulation Permissibly Accrue the
Benefit of the Deferred Loss to the Purchasing Member
Rather Than to the Selling Member?
Petitioner argues that recognition of the deferred loss by
the purchasing party is inconsistent with a general principle
that allowable losses should be confined to the taxpayer
sustaining them, citing various cases, including New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440-441 (1934). Section 267,
however, constitutes a statutory exception to any such general
principle. Losses otherwise allowable under section 165 are
disallowed under section 267 to prevent abuses resulting from the
generation of loss deductions by persons with common economic
interests. See Davis v. Commissioner, 88 T.C. 122 (1987), affd.
866 F.2d 852 (6th Cir. 1989); Hassen v. Commissioner, 63 T.C. 175
(1974), affd. 599 F.2d 305 (9th Cir. 1979).
In McWilliams v. Commissioner, 331 U.S. 694 (1947), the
Supreme Court thoroughly considered and explained the purposes of
section 24(b) of the Internal Revenue Code of 1939, which was the
predecessor to section 267:
Section 24(b) states an absolute prohibition--not a
presumption--against the allowance of losses on any sales
between the members of certain designated groups. The one
common characteristic of these groups is that their members,
although distinct legal entities, generally have a near-
identity of economic interests. It is a fair inference that
even legally genuine intra-group transfers were not thought
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011