Unionbancal Corporation - Page 22




                                       - 22 -                                         

         section 267 had long included certain controlled corporations                
         within the definition of related parties under section 267(b)                
         that were subject to the general loss disallowance and gain                  
         adjustment provisions of subsections (a)(1) and (d).10  When                 
         Congress created the special rules of section 267(f), it also                
         enlarged the class of controlled corporations defined as related             
         parties, to curb further the sorts of abuses that section 267 was            
         meant to address:                                                            
              Congress believed that certain related parties, such as                 
              * * * controlled corporations should be made subject to the             
              related party rules in order to prevent tax avoidance on                
              transactions between those parties. [Staff of Joint Comm. on            
              Taxation, General Explanation of the Revenue Provisions of              
              the Deficit Reduction Act of 1984, at 542 (J. Comm. Print               
              1985).]                                                                 
              The House bill would have simply applied the general loss               
         disallowance rules of section 267(a)(1) to the expanded class of             
         controlled corporations.11  The Senate bill followed the House               


               10  Prior to amendment in 1984, sec. 267(b)(3) defined as              
          related taxpayers:                                                          
               Two corporations more than 50 percent in value of the                  
               outstanding stock of each of which is owned, directly or               
               indirectly, by or for the same individual, if either one of            
               such corporations, with respect to the taxable year of the             
               corporation preceding the date of the sale or exchange was,            
               under the law applicable to such taxable year, a personal              
               holding company or a foreign personal holding company.                 

               11  The House report stated:                                           
                    the bill extends the loss disallowance and accrual                
                                                             (continued...)           





Page:  Previous  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  Next

Last modified: May 25, 2011