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Section 165(g)28 authorizes a domestic corporation owning
28Sec. 165(g) provides in pertinent part:
SEC. 165(g). Worthless Securities.--
(1) General rule.–-If any security which is a
capital asset becomes worthless during the taxable
year, the loss resulting therefrom shall, for purposes
of this subtitle, be treated as a loss from the sale or
exchange, on the last day of the taxable year, of a
capital asset.
(2) Security defined.--For purposes of this
subsection, the term "security" means--
(A) a share of stock in a corporation;
(B) a right to subscribe for, or to
receive, a share of stock in a corporation;
or
(C) a bond, debenture, note, or
certificate, or other evidence of
indebtedness, issued by a corporation * * *,
with interest coupons or in registered form.
(3) Securities in affiliated corporation.--For
purposes of paragraph (1), any security in a
corporation affiliated with a taxpayer which is a
domestic corporation shall not be treated as a capital
asset. * * * a corporation shall be treated as
affiliated with the taxpayer only if--
(A) stock possessing at least 80 percent
of the voting power of all classes of its
stock and at least 80 percent of each class
of its nonvoting stock is owned directly by
the taxpayer, and
(B) more than 90 percent of the
aggregate of its gross receipts for all
taxable years has been from sources other
than royalties, rents (except rents derived
from rental of properties to employees of the
corporation in the ordinary course of its
operating business), dividends, interest
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