IRS Proposes Rules Limiting Losses for Controlled Groups Transactions

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IRS proposes rules (REG-118761-09) that would limit the circumstances under which taxpayers can claim losses in transactions involving controlled groups, in what one practitioner says represents a continuing trend by the government to limit such losses. “This is a continuation of the government's efforts to prevent taxpayers from claiming losses in stock,” Mark Silverman, Steptoe & Johnson LLP, Washington, D.C., tells BNA. “This has been ongoing.” The rules provide guidance on the federal income tax treatment of deferred losses on the sale or exchange of property between members of a controlled group under tax code Section 267, including transactions in which the member acquiring the property subsequently recognizes a corresponding gain with respect to the property.