Unionbancal Corporation - Page 20

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              prevent an immediate loss deduction to the seller and accrue            
              the loss either in terms of a limited gain recognition to               
              the purchaser pursuant to section 267(d) or as a deferral of            
              the tax benefit of the loss pursuant to section 267(f).  We             
              think what Congress intended to ‘extend’ was the class of               
              transaction in which there would be a delay, of some kind,              
              in the recognition of a loss until there was an economically            
              genuine realization of the loss.  [Fn. ref. omitted;                    
              emphasis added.]                                                        
              Consistent with this rationale, the Temporary Regulation                
         reasonably interprets section 267(f) as requiring deferral until             
         the loss property is disposed of outside the controlled group, at            
         which time there is an economically genuine realization of the               
              Nothing in the statutory language expressly mandates that               
         the benefit of the deferred loss accrue to the seller.                       
         Petitioner cites various cases, including Hassen v. Commissioner,            
         supra, and Grady Whitlock Leasing Corp. v. Commissioner, T.C.                
         Memo. 1997-405, for the proposition that the loss that is                    
         disallowed under section 267(a)(1) is the seller’s loss.                     
         Therefore, petitioner concludes, the loss that is deferred under             
         section 267(f) must be the seller’s loss, rather than the                    
         controlled group’s loss, and must be restored to the seller.  The            
         cited cases, however, add nothing to the analysis other than to              
         show that section 267(a)(1) does not permit recognition of the               
         loss putatively sustained by the seller.  The statute does not               
         otherwise identify the disallowed loss with the seller.  To the              
         contrary, the gain-reduction adjustment under subsection (d)                 

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Last modified: May 25, 2011