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refusal to allow Standard Chartered-U.K. to recognize the loss.
Petitioner contends that, in this specific fact situation,
because the United Kingdom denied the loss for United Kingdom tax
purposes to the member of the controlled group who bought the
property, the Temporary Regulation has the effect of denying and
not deferring the loss, contrary to section 267(f).
We disagree. Under the Temporary Regulation, Standard
Chartered-U.K. was entitled under U.S. tax law to have its basis
in the loan portfolio increased for U.S. income tax purposes.
The inability of Standard Chartered-U.K. to avail itself of the
deferred loss under United Kingdom tax law is irrelevant. Had
petitioner transferred the loan portfolio to a U.S. affiliate, or
had its foreign affiliates been located outside the United
Kingdom, the results might have been different. We agree with
respondent that the validity of the Temporary Regulation cannot
depend upon the treatment of the deferred loss under foreign tax
law. Cf. United States v. Goodyear Tire & Rubber Co., 493 U.S.
132, 143-145 (1989); Biddle v. Commissioner, 302 U.S. 573, 578-
579 (1938).
5. Effect of the Final Regulation on the Validity of the
Temporary Regulation.
Petitioner contends that the Loss Restoration Exception in
the Temporary Regulation is "diametrically, fundamentally and
precisely opposed" to the treatment of deferred losses under the
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