Loss Limitation Rules, 10319-10327 [05-3951]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 70, Number 41 (Thursday, March 3, 2005)]
[Rules and Regulations]
[Pages 10319-10327]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-3951]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9187]
RIN 1545-BA52


Loss Limitation Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final regulations under sections 337(d) 
and 1502 of the Internal Revenue Code (Code). These regulations 
disallow certain losses recognized on sales of subsidiary stock by 
members of a consolidated group. These regulations apply to 
corporations filing consolidated returns, both during and after the 
period of affiliation, and also affect purchasers of the stock of 
members of a consolidated group.

DATES: Effective Date: These regulations are effective April 4, 2005.
    Applicability Date: For dates of applicability, see Sec. Sec.  
1.337(d)-2(g), 1.1502-20(i), and 1.1502-32(b).

FOR FURTHER INFORMATION CONTACT: Theresa Abell (202) 622-7700 or Martin 
Huck (202) 622-7750 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)) under control number 1545-1774.
    The collection of information in these final regulations is in 
Sec. Sec.  1.337(d)-2(c), 1.1502-20(i), and 1.1502-32(b)(4). The 
information is required to allow the taxpayer to make certain elections 
to determine the amount of allowable loss under Sec.  1.337(d)-2, Sec.  
1.1502-20 as currently in effect, or under Sec.  1.1502-20 modified so 
that the amount of allowable loss determined pursuant to Sec.  1.1502-
20(c)(1) is computed by taking into account only the amounts computed 
under Sec.  1.1502-20(c)(1)(i) and (ii); to allow the taxpayer to 
reapportion a section 382 limitation in certain cases; to allow the 
taxpayer to waive certain loss carryovers; to allow acquiring groups to 
reduce the amount of certain loss carryovers deemed to expire; and to 
ensure that loss is not disallowed and basis is not reduced under Sec.  
1.337(d)-2 to the extent the taxpayer establishes that the loss or 
basis is not attributable to the recognition of built-in gain on the 
disposition of an asset. The collection of information is required to 
obtain a benefit. The likely respondents are corporations that file 
consolidated income tax returns.
    The estimated burden is as follows:
    Estimated total annual reporting and/or recordkeeping burden: 
36,720 hours.
    Estimated average annual burden per respondent: 2 hours.
    Estimated number of respondents: 18,360.
    Estimated annual frequency of responses: Once.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Office 
of Management and

[[Page 10320]]

Budget, Attn: Desk Officer for the Department of Treasury, Office of 
Information and Regulatory Affairs, Washington, DC 20503, with copies 
to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, 
SE:W:CAR:MP:T:T:SP, Washington, DC 20224.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to the collection of information must be 
retained as long as their contents may become material in the 
administration of any Internal Revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    On March 7, 2002, the IRS and Treasury Department issued a Treasury 
decision that included temporary regulations and cross-referencing 
proposed regulations (TD 8984, 67 FR 11034; REG-102740-02) implementing 
the repeal of the General Utilities doctrine in the consolidated return 
context pursuant to the mandate of section 337(d). Those regulations 
included Sec. Sec.  1.337(d)-2T, 1.1502-20T(i), and 1.1502-
32T(b)(4)(v).
    For dispositions and deconsolidations of subsidiary stock before 
March 7, 2002, and dispositions and deconsolidations of subsidiary 
stock on or after March 7, 2002, that were effected pursuant to a 
binding written contract entered into before such date that was in 
continuous effect until the disposition or deconsolidation, Sec.  
1.1502-20T(i) permits consolidated groups to elect to calculate 
allowable loss on the sale of subsidiary stock, or the basis reduction 
required on the deconsolidation of subsidiary stock, by applying Sec.  
1.1502-20 in its entirety, Sec.  1.1502-20 without regard to the 
duplicated loss factor of the loss disallowance formula, or Sec.  
1.337(d)-2T. Section 1.337(d)-2T disallows certain losses recognized on 
sales of subsidiary stock by members of a consolidated group and, under 
certain circumstances, requires the basis of subsidiary stock to be 
reduced to its value immediately before a deconsolidation of the stock. 
For dispositions and deconsolidations on or after March 7, 2002, unless 
the disposition or deconsolidation was effected pursuant to a binding 
written contract entered into before March 7, 2002, that was in 
continuous effect until the disposition or deconsolidation, groups must 
apply Sec.  1.337(d)-2T to calculate allowable loss on the sale of 
subsidiary stock or the basis reduction required on the deconsolidation 
of subsidiary stock.
    The Treasury decision also included a number of correlative 
provisions, in both Sec. Sec.  1.1502-20T and 1.1502-32T, designed to 
address certain issues that could arise if a group elected to apply 
Sec.  1.1502-20 without regard to the duplicated loss factor of the 
loss disallowance formula, or Sec.  1.337(d)-2T. Technical changes to 
Sec. Sec.  1.337(d)-2T, 1.1502-20T, and 1.1502-32T were made by 
Treasury decisions 8998 (67 FR 37998), 9057 (68 FR 24351), 9118 (69 FR 
12799), and 9155 (69 FR 51175).
    On August 25, 2004, the IRS issued Notice 2004-58 (2004-39 I.R.B. 
520) describing the basis disconformity method and announcing that the 
IRS will accept that method as a method for determining whether 
subsidiary stock loss is disallowed and subsidiary stock basis is 
reduced under Sec.  1.337(d)-2T. Contemporaneous with the issuance of 
the Notice, the IRS and Treasury Department published temporary and 
cross-referencing proposed regulations (TD 9154, 69 FR 52419; REG-
135898-04) extending the time for making an election under Sec.  
1.1502-20T(i) and permitting taxpayers to amend or revoke prior 
elections made under Sec.  1.1502-20T(i).
    In response to the promulgation of Sec.  1.337(d)-2T and the 
issuance of Notice 2004-58, the IRS and Treasury Department have 
received a number of comments on the regulations, the basis 
disconformity method, and, more generally, on the manner in which the 
repeal of the General Utilities doctrine should be implemented in the 
consolidated group context. The IRS and Treasury Department have 
studied and are continuing to study those comments. In that regard, the 
IRS and Treasury Department intend to publish within the near term 
proposed regulations with an alternative approach to this problem. 
Until those proposed regulations are published as final or temporary 
regulations, whether certain losses recognized on sales of subsidiary 
stock are disallowed and whether basis of subsidiary stock must be 
reduced immediately before a deconsolidation of the stock will continue 
to be determined under the rules of Sec.  1.337(d)-2T. Accordingly, 
this Treasury decision adopts the rules of Sec.  1.337(d)-2T (as in 
effect on March 2, 2005) as final regulation Sec.  1.337(d)-2 without 
substantive change. The IRS will accept the basis disconformity method 
as a method for determining whether subsidiary stock loss is disallowed 
and subsidiary stock basis is reduced under that final regulation.
    In addition, to permit taxpayers to make the election to apply 
Sec.  1.1502-20 without regard to the duplicated loss factor of the 
loss disallowance rule, or the rule of Sec.  1.337(d)-2, as provided in 
this Treasury Decision, this Treasury decision also adopts the rules of 
Sec.  1.1502-20T and the correlative rules of Sec.  1.1502-32T (as in 
effect on March 2, 2005) as final regulations without substantive 
change.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the fact that these regulations will primarily affect 
affiliated groups of corporations that have elected to file 
consolidated returns, which tend to be larger businesses. Therefore, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the 
Code, these regulations will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on their 
impact on small business.

Drafting Information

    The principal authors of these regulations are Theresa Abell and 
Martin Huck of the Office of Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by removing 
the entry for Sec.  1.337(d)-2T and adding an entry in numerical order 
to read, in part, as follows:

    Authority: 26 U.S.C. 7805 * * *

[[Page 10321]]

    Section 1.337(d)-2 also issued under 26 U.S.C. 337(d). * * *

0
Par. 2. Section 1.337(d)-2 is revised to read as follows:


Sec.  1.337(d)-2  Loss limitation rules.

    (a) Loss disallowance--(1) General rule. No deduction is allowed 
for any loss recognized by a member of a consolidated group with 
respect to the disposition of stock of a subsidiary.
    (2) Definitions. For purposes of this section:
    (i) The definitions in Sec.  1.1502-1 apply.
    (ii) Disposition means any event in which gain or loss is 
recognized, in whole or in part.
    (3) Coordination with loss deferral and other disallowance rules. 
For purposes of this section, the rules of Sec.  1.1502-20(a)(3) apply, 
with appropriate adjustments to reflect differences between the 
approach of this section and that of Sec.  1.1502-20.
    (4) Netting. Paragraph (a)(1) of this section does not apply to 
loss with respect to the disposition of stock of a subsidiary, to the 
extent that, as a consequence of the same plan or arrangement, gain is 
taken into account by members with respect to stock of the same 
subsidiary having the same material terms. If the gain to which this 
paragraph applies is less than the amount of the loss with respect to 
the disposition of the subsidiary's stock, the gain is applied to 
offset loss with respect to each share disposed of as a consequence of 
the same plan or arrangement in proportion to the amount of the loss 
deduction that would have been disallowed under paragraph (a)(1) of 
this section with respect to such share before the application of this 
paragraph (a)(4). If the same item of gain could be taken into account 
more than once in limiting the application of paragraphs (a)(1) and 
(b)(1) of this section, the item is taken into account only once.
    (b) Basis reduction on deconsolidation--(1) General rule. If the 
basis of a member of a consolidated group in a share of stock of a 
subsidiary exceeds its value immediately before a deconsolidation of 
the share, the basis of the share is reduced at that time to an amount 
equal to its value. If both a disposition and a deconsolidation occur 
with respect to a share in the same transaction, paragraph (a) of this 
section applies and, to the extent necessary to effectuate the purposes 
of this section, this paragraph (b) applies following the application 
of paragraph (a) of this section.
    (2) Deconsolidation. Deconsolidation means any event that causes a 
share of stock of a subsidiary that remains outstanding to be no longer 
owned by a member of any consolidated group of which the subsidiary is 
also a member.
    (3) Value. Value means fair market value.
    (4) Netting. Paragraph (b)(1) of this section does not apply to 
reduce the basis of stock of a subsidiary, to the extent that, as a 
consequence of the same plan or arrangement, gain is taken into account 
by members with respect to stock of the same subsidiary having the same 
material terms. If the gain to which this paragraph applies is less 
than the amount of basis reduction with respect to shares of the 
subsidiary's stock, the gain is applied to offset basis reduction with 
respect to each share deconsolidated as a consequence of the same plan 
or arrangement in proportion to the amount of the reduction that would 
have been required under paragraph (b)(1) of this section with respect 
to such share before the application of this paragraph (b)(4).
    (c) Allowable loss--(1) Application. This paragraph (c) applies 
with respect to stock of a subsidiary only if a separate statement 
entitled Sec.  1.337(d)-2(c) statement is included with the return in 
accordance with paragraph (c)(3) of this section.
    (2) General rule. Loss is not disallowed under paragraph (a)(1) of 
this section and basis is not reduced under paragraph (b)(1) of this 
section to the extent the taxpayer establishes that the loss or basis 
is not attributable to the recognition of built-in gain, net of 
directly related expenses, on the disposition of an asset (including 
stock and securities). Loss or basis may be attributable to the 
recognition of built-in gain on the disposition of an asset by a prior 
group. For purposes of this section, gain recognized on the disposition 
of an asset is built-in gain to the extent attributable, directly or 
indirectly, in whole or in part, to any excess of value over basis that 
is reflected, before the disposition of the asset, in the basis of the 
share, directly or indirectly, in whole or in part, after applying 
section 1503(e) and other applicable provisions of the Internal Revenue 
Code and regulations. Federal income taxes may be directly related to 
built-in gain recognized on the disposition of an asset only to the 
extent of the excess (if any) of the group's income tax liability 
actually imposed under Subtitle A of the Internal Revenue Code for the 
taxable year of the disposition of the asset over the group's income 
tax liability for the taxable year redetermined by not taking into 
account the built-in gain recognized on the disposition of the asset. 
For this purpose, the group's income tax liability actually imposed and 
its redetermined income tax liability are determined without taking 
into account the foreign tax credit under section 27(a) of the Internal 
Revenue Code.
    (3) Contents of statement and time of filing. The statement 
required under paragraph (c)(1) of this section must be included with 
or as part of the taxpayer's return for the year of the disposition or 
deconsolidation and must contain--
    (i) The name and employer identification number (E.I.N.) of the 
subsidiary; and
    (ii) The amount of the loss not disallowed under paragraph (a)(1) 
of this section by reason of this paragraph (c) and the amount of basis 
not reduced under paragraph (b)(1) of this section by reason of this 
paragraph (c).
    (4) Example. The principles of paragraphs (a), (b), and (c) of this 
section are illustrated by the examples in Sec. Sec.  1.337(d)-1(a)(5) 
and 1.1502-20(a)(5) (other than Examples 3, 4, and 5) and (b), with 
appropriate adjustments to reflect differences between the approach of 
this section and that of Sec.  1.1502-20, and by the following example. 
For purposes of the examples in this section, unless otherwise stated, 
the group files consolidated returns on a calendar year basis, the 
facts set forth the only corporate activity, and all sales and 
purchases are with unrelated buyers or sellers. The basis of each asset 
is the same for determining earnings and profits adjustments and 
taxable income. Tax liability and its effect on basis, value, and 
earnings and profits are disregarded. Investment adjustment system 
means the rules of Sec.  1.1502-32. The example reads as follows:

    Example. Loss offsetting built-in gain in a prior group. (i) P 
buys all the stock of T for $50 in Year 1, and T becomes a member of 
the P group. T has 2 assets. Asset 1 has a basis of $50 and a value 
of $0, and asset 2 has a basis of $0 and a value of $50. T sells 
asset 2 during Year 3 for $50 and recognizes a $50 gain. Under the 
investment adjustment system, P's basis in the T stock increased to 
$100 as a result of the recognition of gain. In Year 5, all of the 
stock of P is acquired by the P1 group, and the former members of 
the P group become members of the P1 group. T then sells asset 1 for 
$0, and recognizes a $50 loss. Under the investment adjustment 
system, P's basis in the T stock decreases to $50 as a result of the 
loss. T's assets decline in value from $50 to $40. P then sells all 
the stock of T for $40 and recognizes a $10 loss.
    (ii) P's basis in the T stock reflects both T's unrecognized 
gain and unrecognized loss with respect to its assets. The gain T 
recognizes on the disposition of asset 2 is built-in gain with 
respect to both the P and P1 groups for purposes of paragraph (c)(2) 
of this section. In addition, the loss T

[[Page 10322]]

recognizes on the disposition of asset 1 is built-in loss with 
respect to the P and P1 groups for purposes of paragraph (c)(2) of 
this section. T's recognition of the built-in loss while a member of 
the P1 group offsets the effect on T's stock basis of T's 
recognition of the built-in gain while a member of the P group. 
Thus, P's $10 loss on the sale of the T stock is not attributable to 
the recognition of built-in gain, and the loss is therefore not 
disallowed under paragraph (c)(2) of this section.
    (iii) The result would be the same if, instead of having a $50 
built-in loss in asset 1 when it becomes a member of the P group, T 
has a $50 net operating loss carryover and the carryover is used by 
the P group.

    (d) Successors. For purposes of this section, the rules and 
examples of Sec.  1.1502-20(d) apply, with appropriate adjustments to 
reflect differences between the approach of this section and that of 
Sec.  1.1502-20.
    (e) Anti-avoidance rules. For purposes of this section, the rules 
and examples of Sec.  1.1502-20(e) apply, with appropriate adjustments 
to reflect differences between the approach of this section and that of 
Sec.  1.1502-20.
    (f) Investment adjustments. For purposes of this section, the rules 
and examples of Sec.  1.1502-20(f) apply, with appropriate adjustments 
to reflect differences between the approach of this section and that of 
Sec.  1.1502-20.
    (g) Effective dates. This section applies with respect to 
dispositions and deconsolidations on or after March 3, 2005. In 
addition, this section applies to dispositions and deconsolidations for 
which an election is made under Sec.  1.1502-20(i)(2) to determine 
allowable loss under this section. If loss is recognized because stock 
of a subsidiary became worthless, the disposition with respect to the 
stock is treated as occurring on the date the stock became worthless. 
For dispositions and deconsolidations after March 6, 2002 and before 
March 3, 2005, see Sec.  1.337(d)-2T as contained in the 26 CFR part 1 
in effect on March 2, 2005.


Sec.  1.337(d)-2T  [Removed]

0
Par. 3. Section 1.337(d)-2T is removed.

0
Par. 4. In Sec.  1.1502-20, paragraph (i) is revised to read as 
follows:


Sec.  1.1502-20  Disposition or deconsolidation of subsidiary stock.

* * * * *
    (i) Limitations on the applicability of Sec.  1.1502-20--(1) 
Dispositions and deconsolidations on or after March 7, 2002. Except to 
the extent specifically incorporated in Sec.  1.337(d)-2, paragraphs 
(a) and (b) of this section do not apply to a disposition or 
deconsolidation of stock of a subsidiary on or after March 7, 2002, 
unless the disposition or deconsolidation was effected pursuant to a 
binding written contract entered into before March 7, 2002, that was in 
continuous effect until the disposition or deconsolidation.
    (2) Dispositions and deconsolidations prior to March 7, 2002. In 
the case of a disposition or deconsolidation of stock of a subsidiary 
by a member before March 7, 2002, or a disposition or deconsolidation 
on or after March 7, 2002, that was effected pursuant to a binding 
written contract entered into before March 7, 2002, that was in 
continuous effect until the disposition or deconsolidation, a 
consolidated group may determine the amount of the member's allowable 
loss or basis reduction by applying this section in its entirety, or, 
in lieu thereof, subject to the conditions set forth in this paragraph 
(i), by making an irrevocable election to apply the provisions of 
either--
    (i) This section, except that in applying paragraph (c)(1) of this 
section, the amount of loss disallowed under paragraph (a)(1) of this 
section and the amount of basis reduction under paragraph (b)(1) of 
this section with respect to a share of stock will not exceed the sum 
of the amounts described in paragraphs (c)(1)(i) and (ii) of this 
section; or
    (ii) Section 1.337(d)-2.
    (3) Operating rules--(i) Reattribution of losses in the case of an 
election to determine allowable loss by applying the provisions 
described in paragraph (i)(2)(i) of this section. If a consolidated 
group elects to determine allowable loss by applying the provisions 
described in paragraph (i)(2)(i) of this section, an election described 
in paragraph (g) of this section to reattribute losses will be 
respected only if the requirements of paragraph (g) of this section, 
including the requirement that the election be filed with the group's 
income tax return for the year of the disposition, have been or are 
satisfied. For example, if a consolidated group did not file a valid 
election described in paragraph (g) of this section with its return for 
the year of the disposition, this section does not authorize the group 
that disposed of the stock to make such an election with its return for 
the year in which it elects to determine its allowable stock loss under 
the provisions described in paragraph (i)(2)(i) of this section. If a 
consolidated group that made a valid election described in paragraph 
(g) of this section with respect to the disposition of stock elects to 
determine allowable loss by applying the provisions described in 
paragraph (i)(2)(i) of this section, the election described in 
paragraph (g) of this section may not be revoked, and the amount of 
loss treated as reattributed as of the time of the disposition pursuant 
to the election described in paragraph (g) of this section is the 
amount of loss originally reattributed, reduced to the extent that it 
exceeds the greater of--
    (A) The amount of stock loss disallowed after applying the 
provisions described in paragraph (i)(2)(i) of this section; and
    (B) The amount of reattributed losses that the group that disposed 
of the stock absorbed in years for which the assessment of a deficiency 
is prevented by any law or rule of law as of the date the election to 
apply the provisions described in paragraph (i)(2)(i) of this section 
is filed and at all times thereafter.
    (ii) Reattribution of losses in the case of an election to 
determine allowable loss by applying the provisions described in 
paragraph (i)(2)(ii) of this section. If a consolidated group elects to 
determine allowable loss by applying the provisions described in 
paragraph (i)(2)(ii) of this section, the consolidated group may not 
make an election described in paragraph (g) of this section to 
reattribute any losses. If the consolidated group made an election 
described in paragraph (g) of this section with respect to the 
disposition of subsidiary stock, the amount of loss treated as 
reattributed pursuant to such election will be the greater of--
    (A) Zero; and
    (B) The amount of reattributed losses that the group that disposed 
of the stock absorbed in years for which the assessment of a deficiency 
is prevented by any law or rule of law as of the date the election to 
apply the provisions described in paragraph (i)(2)(ii) of this section 
is filed and at all times thereafter.
    (iii) Apportionment of section 382 limitation in the case of a 
reduction of reattributed losses--(A) Losses subject to a separate 
section 382 limitation. If, as a result of the application of paragraph 
(i)(3)(i) or (ii) and paragraph (i)(3)(vii) of this section, pre-change 
separate attributes that were subject to a separate section 382 
limitation are treated as losses of a subsidiary and the common parent 
previously elected to apportion all or a part of such limitation to 
itself under Sec.  1.1502-96(d), the common parent may reduce the 
amount of such limitation apportioned to itself.
    (B) Losses subject to a subgroup section 382 limitation. If, as a 
result of the application of paragraph (i)(3)(i) or (ii) and paragraph 
(i)(3)(vii) of this section, pre-change subgroup attributes that were 
subject to a subgroup section

[[Page 10323]]

382 limitation are treated as losses of a subsidiary and the common 
parent previously elected to apportion all or a part of such limitation 
to itself under Sec.  1.1502-96(d), the common parent may reduce the 
amount of such limitation apportioned to itself. In addition, if such 
subsidiary has ceased to be a member of the loss subgroup to which the 
pre-change subgroup attributes relate, the common parent may increase 
the total amount of such limitation apportioned to such subsidiary (or 
loss subgroup that includes such subsidiary) under Sec.  1.1502-95(c) 
by an amount not in excess of the amount by which such limitation that 
is apportioned to the common parent is reduced pursuant to the previous 
sentence.
    (C) Losses subject to a consolidated section 382 limitation. If, as 
a result of the application of paragraph (i)(3)(i) or (ii) and 
paragraph (i)(3)(vii) of this section, pre-change consolidated 
attributes (or pre-change subgroup attributes) that were subject to a 
consolidated section 382 limitation (or subgroup section 382 limitation 
where the common parent was a member of the loss subgroup) are treated 
as losses of a subsidiary, and the subsidiary has ceased to be a member 
of the loss group (or loss subgroup), the common parent may increase 
the amount of such limitation that is apportioned to such subsidiary 
(or loss subgroup that includes such subsidiary) under Sec.  1.1502-
95(c). The amount of each element of such limitation that can be 
apportioned to a subsidiary (or loss subgroup that includes such 
subsidiary) pursuant to this paragraph (i)(3)(iii)(C), however, cannot 
exceed the product of (x) the element and (y) a fraction the numerator 
of which is the amount of pre-change consolidated attributes (or 
subgroup attributes) subject to that limitation that are treated as 
losses of the subsidiary (or loss subgroup) as a result of the 
application of paragraph (i)(3)(i) or (ii) and paragraph (i)(3)(vii) of 
this section and the denominator of which is the total amount of pre-
change attributes subject to that limitation determined as of the close 
of the taxable year in which the subsidiary ceases to be a member of 
the group (or loss subgroup).
    (D) Operating rules--(1) Limitations on apportionment. In making 
any adjustment to an apportionment of a subgroup section 382 limitation 
or a consolidated section 382 limitation pursuant to paragraph 
(i)(3)(iii)(B) or (C) of this section, the common parent must take into 
account the extent, if any, to which such limitation has previously 
been apportioned to another subsidiary or loss subgroup prior to the 
date the election to apply the provisions described in paragraph 
(i)(2)(i) or (ii) of this section is filed.
    (2) Manner and effect of adjustment to previous apportionment of 
limitation to common parent. Any reduction in a previous apportionment 
of a separate section 382 limitation or a subgroup section 382 
limitation to the common parent made pursuant to paragraph 
(i)(3)(iii)(A) or (B) of this section is treated as effective when the 
previous apportionment was effective. Any such adjustment must be made 
in a manner consistent with the principles of Sec.  1.1502-95(c). For 
example, to the extent the apportionment of a separate section 382 
limitation or a subgroup section 382 limitation to a common parent is 
reduced pursuant to paragraph (i)(3)(iii)(A) or (B) of this section, 
the amount of such limitation available to the subsidiary or loss 
subgroup, as applicable, is increased.
    (3) Manner and effect of adjustment to apportionment of limitation 
to departing subsidiary or loss subgroup. Any increase in an amount of 
a subgroup section 382 limitation or a consolidated section 382 
limitation apportioned to a departing subsidiary (or loss subgroup that 
includes such subsidiary) made pursuant to paragraph (i)(3)(iii)(B) or 
(C) of this section is treated as effective for taxable years ending 
after the date the subsidiary ceases to be a member of the group or 
loss subgroup. Any such adjustment may be made regardless of whether 
the common parent previously elected to apportion all or a part of such 
limitation to such subsidiary (or loss subgroup that includes such 
subsidiary) under Sec.  1.1502-95(c) or 1.1502-95A(c), but must be made 
in a manner consistent with the principles of Sec.  1.1502-95(c). For 
example, to the extent the apportionment of an element of a subgroup 
section 382 limitation or a consolidated section 382 limitation to a 
departing subsidiary is increased pursuant to paragraph (i)(3)(iii)(B) 
or (C) of this section, the amount of such element of such limitation 
that is available to the loss subgroup or loss group is reduced 
consistent with Sec.  1.1502-95(c)(3).
    (4) Prohibition against other adjustments. This paragraph 
(i)(3)(iii) does not authorize the common parent to adjust the 
apportionment of any separate section 382 limitation, subgroup section 
382 limitation, or consolidated section 382 limitation that it 
previously apportioned to a subsidiary, to a loss subgroup, or to 
itself under Sec.  1.1502-95(c), 1.1502-95A(c), or 1.1502-96(d), other 
than as provided in paragraphs (i)(3)(iii)(A), (B), and (C) of this 
section.
    (E) Time and manner of making apportionment adjustment. An 
adjustment to the apportionment of any separate section 382 limitation, 
subgroup section 382 limitation, or consolidated section 382 limitation 
pursuant to paragraph (i)(3)(iii)(A), (B), or (C) of this section must 
be made as part of the group's election to apply the provisions of 
paragraph (i)(2)(i) or (ii) of this section, as described in paragraph 
(i)(4) of this section.
    (iv) Notification of reduction of reattributed losses and 
adjustment of apportionment of section 382 limitation. If the 
application of paragraph (i)(3)(i) or (ii) of this section results in a 
reduction of the losses treated as reattributed pursuant to an election 
described in paragraph (g) of this section, then, prior to the date 
that the group files its income tax return for the taxable year that 
includes August 26, 2004, the common parent must send the notification 
required by this paragraph to the subsidiary, at the subsidiary's last 
known address. In addition, if the acquirer of the subsidiary stock was 
a member of a consolidated group at the time of the disposition, the 
common parent must send a copy of such notification to the person that 
was the common parent of the acquirer's group at the time of the 
acquisition, at its last known address. The notification is to be in 
the form of a statement entitled Recomputation of Losses Reattributed 
Pursuant to the Election Described in Sec.  1.1502-20(g), that is 
signed by the common parent and that includes the following 
information--
    (A) The name and employer identification number (E.I.N.) of the 
subsidiary;
    (B) The original and the recomputed amount of losses treated as 
reattributed pursuant to the election described in paragraph (g) of 
this section; and
    (C) If the apportionment of a separate section 382 limitation, a 
subgroup section 382 limitation, or a consolidated section 382 
limitation is adjusted pursuant to paragraph (i)(3)(iii)(A), (B), or 
(C) of this section, the original and the adjusted apportionment of 
such limitation.
    (v) Items taken into account in open years--(A) General rule. An 
election under paragraph (i)(2) of this section affects a taxpayer's 
items of income, gain, deduction, or loss only to the extent that the 
election gives rise, directly or indirectly, to items or amounts that 
would properly be taken into account in a year for which an assessment 
of deficiency or a refund of overpayment, as the case may be, is not

[[Page 10324]]

prevented by any law or rule of law. Under this paragraph, if the 
election increases the loss allowed with respect to a disposition of 
subsidiary stock, but the year of the disposition (or the year to which 
such loss would have been carried back or carried forward) is a year 
for which a refund of overpayment is prevented by law, to the extent 
that the absorption of such excess loss in such year would have 
affected the tax treatment of another item (e.g., another loss that was 
absorbed in such year) that has an effect in a year for which a refund 
of overpayment is not prevented by any law or rule of law, the election 
will affect the treatment of such other item. Therefore, if the 
absorption of the excess loss in the year of the disposition (which is 
a year for which a refund of overpayment is prevented by law) would 
have prevented the absorption of another loss (the second loss) in such 
year and such loss would have been carried to and used in a year for 
which a refund of overpayment is not prevented by any law or rule of 
law (the other year), the election makes the second loss available for 
use in the other year.
    (B) Special rule. If a member's basis in stock of a subsidiary was 
reduced pursuant to Sec.  1.1502-32 because a loss with respect to 
stock of a lower-tier subsidiary was treated as disallowed under this 
section, then, to the extent such disallowed loss is allowed as a 
result of an election under paragraph (i) of this section but would 
have been properly absorbed or expired in a year for which a refund of 
overpayment is prevented by law or rule of law, the member's basis in 
the subsidiary stock may be increased for purposes of determining the 
group's or the shareholder-member's Federal income tax liability in all 
years for which a refund of overpayment is not prevented by law or rule 
of law.
    (vi) Conforming amendments for items previously taken into account 
in open years. To the extent that, on any Federal income tax return, 
the common parent absorbed losses that were reattributed pursuant to an 
election described in paragraph (g) of this section and the amount of 
losses so absorbed is in excess of the amount of losses that are 
treated as reattributed after application of paragraph (i)(3)(i) or 
(ii) of this section, or that may be taken into account after any 
adjustment to an apportionment of a separate section 382 limitation, a 
subgroup section 382 limitation, or a consolidated section 382 
limitation pursuant to paragraph (i)(3)(iii) of this section, such 
returns must be amended to the greatest extent possible to reflect the 
reduction in the amount of losses treated as reattributed and any 
adjustment to the apportionment of such limitation.
    (vii) Availability of losses to subsidiary. To the extent that any 
losses of a subsidiary are reattributed to the common parent pursuant 
to an election described in paragraph (g) of this section, such 
reattribution is binding on the subsidiary and any group of which the 
subsidiary is or becomes a member. Therefore, if the subsidiary ceases 
to be a member of the group, any reattributed losses are not thereafter 
available to the subsidiary and may not be utilized by the subsidiary 
or any other group of which such subsidiary is or becomes a member. To 
the extent that the application of paragraph (i)(3)(i) or (ii) of this 
section results in a reduction in the amount of losses treated as 
reattributed to the common parent pursuant to an election described in 
paragraph (g) of this section, however, losses in the amount of such 
reduction are available to the subsidiary and may be utilized by the 
subsidiary or any group of which such subsidiary is a member, subject 
to applicable limitations (e.g., section 382).
    (viii) Apportionment of section 382 limitation in the case of an 
amendment of an election made pursuant to Sec.  1.1502-32(b)(4)--(A) In 
general. If, in connection with a disposition or deconsolidation of 
subsidiary stock, the subsidiary the stock of which was disposed of or 
deconsolidated became a member of another consolidated group (the 
acquiring group), and, pursuant to Sec.  1.1502-32(b)(4)(vii), the 
acquiring group amends an election made pursuant to Sec.  1.1502-
32(b)(4) to treat all or a portion of the loss carryovers of such 
subsidiary (or a lower-tier corporation of such subsidiary) as expiring 
for all Federal income tax purposes, then the common parent may 
reapportion a separate, subgroup, or consolidated section 382 
limitation with respect to such subsidiary or lower-tier corporation in 
a manner consistent with the principles of paragraphs (i)(3)(iii)(A) 
through (D) of this section. Any reapportionment of a section 382 
limitation made pursuant to the previous sentence shall have the 
effects described in paragraphs (i)(3)(iii)(D)(ii) and (iii) of this 
section. For purposes of this section, a lower-tier corporation is a 
corporation that was a member of the group of which the subsidiary was 
a member immediately before becoming a member of the acquiring group 
and that became a member of the acquiring group as a result of the 
subsidiary becoming a member of the acquiring group.
    (B) Time and manner of adjustment of apportionment of section 382 
limitation. The common parent must include a statement entitled 
Adjustment of Apportionment of Section 382 Limitation in Connection 
with Amendment of Election under Sec.  1.1502-32(b)(4) with or as part 
of any timely filed (including any extensions) original return for a 
taxable year that includes any date on or before August 26, 2004, or 
with or as part of an amended return filed before the date the original 
return for the taxable year that includes August 26, 2004, is due (with 
regard to extensions). The statement must set forth the name and E.I.N. 
of the subsidiary and both the original and the adjusted apportionment 
of a separate section 382 limitation, a subgroup section 382 
limitation, and a consolidated section 382 limitation, as applicable. 
The requirements of this paragraph (i)(3)(viii)(B) will be treated as 
satisfied if the information required by this paragraph (i)(3)(viii)(B) 
is included in the statement required by paragraph (i)(4) of this 
section rather than in a separate statement.
    (4) Time and manner of making the election. An election to 
determine allowable loss or basis reduction by applying the provisions 
described in paragraph (i)(2)(i) or (ii) of this section is made by 
including the statement required by this paragraph with or as part of 
any timely filed (including any extensions) original return for a 
taxable year that includes any date on or before August 26, 2004, or 
with or as part of an amended return filed before the date the original 
return for the taxable year that includes August 26, 2004, is due 
(including any extensions). Filing a statement in accordance with the 
provisions of this paragraph satisfies the requirement to file a 
``statement of allowed loss'' otherwise imposed under paragraph (c)(3) 
of this section or Sec.  1.337(d)-2(c)(3). The statement required by 
this paragraph satisfies the requirement that a statement be filed in 
order to claim allowable loss or basis reduction by applying the 
provisions described in paragraph (i)(2)(i) or (ii). The statement 
filed under this paragraph shall be entitled Allowed Loss Under Section 
[Specify Section Under Which Allowed Loss Is Determined] Pursuant to 
Section 1.1502-20(i) and must include the following information--
    (i) The name and E.I.N. of the subsidiary and of the member(s) that 
disposed of the subsidiary stock;
    (ii) In the case of an election to determine allowable loss or 
basis reduction by applying the provisions described in paragraph 
(i)(2)(i) of this section, a statement that the taxpayer elects to 
determine allowable loss or

[[Page 10325]]

basis reduction by applying such provisions;
    (iii) In the case of an election to determine allowable loss or 
basis reduction by applying the provisions described in paragraph 
(i)(2)(ii) of this section, a statement that the taxpayer elects to 
determine allowable loss or basis reduction by applying such 
provisions;
    (iv) If an election described in paragraph (g) of this section was 
made with respect to the disposition of the stock of the subsidiary, 
the amount of losses originally treated as reattributed pursuant to 
such election and the amount of losses treated as reattributed pursuant 
to paragraph (i)(3)(i) or (ii) of this section;
    (v) If an apportionment of a separate section 382 limitation, a 
subgroup section 382 limitation, or a consolidated section 382 
limitation is adjusted pursuant to paragraph (i)(3)(iii)(A), (B), or 
(C) of this section, the original and redetermined apportionment of 
such limitation; and
    (vi) If the application of paragraph (i)(3)(i) or (ii) of this 
section results in a reduction of the amount of losses treated as 
reattributed pursuant to an election described in paragraph (g) of this 
section, a statement that the notification described in paragraph 
(i)(3)(iv) of this section was sent to the subsidiary and, if the 
acquirer was a member of a consolidated group at the time of the stock 
sale, to the person that was the common parent of such group at such 
time, as required by paragraph (i)(3)(iv) of this section.
    (5) Revocation or amendment of prior elections--(i) In general. 
Notwithstanding anything to the contrary in this paragraph (i), if a 
consolidated group made an election under Sec.  1.1502-20T(i) to apply 
the provisions described in Sec.  1.1502-20T(i)(2)(i) or (ii), the 
consolidated group may revoke or amend that election as provided in 
this paragraph (i)(5).
    (ii) Time and manner of revoking or amending an election. An 
election to apply the provisions described in Sec.  1.1502-20T(i)(2)(i) 
or (ii) is revoked or amended by including the statement required by 
paragraph (i)(5)(iii) of this section with or as part of any timely 
filed (including any extensions) original return for a taxable year 
that includes any date on or before August 26, 2004, or with or as part 
of an amended return filed before the date the original return for the 
taxable year that includes August 26, 2004, is due (including any 
extensions).
    (iii) Required statement--(A) Revocation. To revoke an election to 
apply the provisions described in Sec.  1.1502-20T(i)(2)(i) or (ii), 
the consolidated group must file a statement entitled Revocation of 
Election Under Section 1.1502-20T(i). The statement must include the 
name and E.I.N. of the subsidiary and of the member(s) that disposed of 
the subsidiary stock.
    (B) Amendment. To amend an election to apply the provisions 
described in Sec.  1.1502-20T(i)(2)(i) or (ii), the consolidated group 
must file a statement entitled Amendment of Election Under Section 
1.1502-20T(i). The statement must include the following information--
    (1) The name and E.I.N. of the subsidiary and of the member(s) that 
disposed of the subsidiary stock; and
    (2) The provision the taxpayer elects to apply to determine 
allowable loss or basis reduction (described in paragraph (i)(2)(i) or 
(ii) of this section).
    (iv) Special rule. If a consolidated group revokes an election made 
under Sec.  1.1502-20T(i), an election described in paragraph (g) of 
this section to reattribute losses will not be respected, even if such 
election was filed with the group's return for the year of the 
disposition.
    (6) Effective date. This paragraph (i) is applicable on and after 
March 3, 2005.
    (7) Cross references. See Sec.  1.1502-32(b)(4)(v) for a special 
rule for filing a waiver of loss carryovers.


Sec.  1.1502-20T(i)  [Removed]

0
Par. 5. In Sec.  1.1502-20T, paragraph (i) is removed.

0
Par. 6. Section 1.1502-32 is amended by revising paragraphs (b)(4)(v) 
and (b)(4)(vii) to read as follows:


Sec.  1.1502-32  Investment adjustments.

* * * * *
    (b) * * *
    (4) * * *
    (v) Special rule for loss carryovers of a subsidiary acquired in a 
transaction for which an election under Sec.  1.1502-20(i)(2) is made--
(A) Expired losses. Notwithstanding paragraph (b)(4)(iv) of this 
section, unless a group otherwise chooses, to the extent that S's loss 
carryovers are increased by reason of an election under Sec.  1.1502-
20(i)(2) and such loss carryovers expire or would have been properly 
used to offset income in a taxable year for which the refund of an 
overpayment is prevented by any law or rule of law as of the date the 
group files its original return for the taxable year in which S 
receives the notification described in Sec.  1.1502-20(i)(3)(iv) and at 
all times thereafter, the group will be deemed to have made an election 
under paragraph (b)(4) of this section to treat all of such loss 
carryovers as expiring for all Federal income tax purposes immediately 
before S became a member of the consolidated group. A group may choose 
not to apply the rule of the previous sentence to all of such loss 
carryovers of S by taking a position on an original or amended tax 
return for each relevant taxable year that is consistent with having 
made such choice.
    (B) Available losses. Notwithstanding paragraph (b)(4)(iv) of this 
section, to the extent that S's loss carryovers are increased by reason 
of an election under Sec.  1.1502-20(i)(2) and such loss carryovers 
have not expired and would not have been properly used to offset income 
in a taxable year for which the refund of an overpayment is prevented 
by any law or rule of law as of the date the group files its original 
return for the taxable year in which S receives the notification 
described in Sec.  1.1502-20(i)(3)(iv) and at all times thereafter, the 
group may make an election under paragraph (b)(4) of this section to 
treat all or a portion of such loss carryovers as expiring for all 
Federal income tax purposes immediately before S became a member of the 
consolidated group. Such election must be filed with the group's 
original return for the taxable year in which S receives the 
notification described in Sec.  1.1502-20(i)(3)(iv).
    (C) Effective dates. Paragraph (b)(4)(v) of this section is 
applicable on and after March 3, 2005. For prior periods, see Sec.  
1.1502-32T(b)(4)(v) as contained in the 26 CFR part 1 in effect on 
March 2, 2005.
    (vi) * * *
    (vii) Special rules for amending waiver of loss carryovers from 
separate return limitation year--(A) Waivers that increased allowable 
loss or reduced basis reduction required. If, in connection with the 
acquisition of S, the group made an election pursuant to paragraph 
(b)(4) of this section to treat all or any portion of S's loss 
carryovers as expiring, and the prior group elected to determine the 
amount of the allowable loss or the basis reduction required with 
respect to the stock of S or a higher-tier corporation of S by applying 
the provisions described in Sec.  1.1502-20(i)(2)(i) or (ii), then the 
group may reduce the amount of any loss carryover deemed to expire (or 
increase the amount of any loss carryover deemed not to expire) as a 
result of the election made pursuant to paragraph (b)(4) of this 
section. The aggregate amount of loss carryovers that may be treated as 
not expiring as a result of amendments made pursuant to this paragraph 
(b)(4)(vii)(A) with respect to S and any higher- and lower-tier 
corporation of S may not exceed the

[[Page 10326]]

amount described in Sec.  1.1502-20(c)(1)(iii) with respect to the 
acquired stock (computed without regard to the effect of the group's 
election or elections pursuant to paragraph (b)(4) of this section, but 
with regard to the effect of the prior group's election pursuant to 
Sec.  1.1502-20(g), if any, prior to the application of Sec.  1.1502-
20(i)(3)). For purposes of determining the aggregate amount of loss 
carryovers that may be treated as not expiring as a result of 
amendments made pursuant to this paragraph (b)(4)(vii)(A) with respect 
to S and any higher- and lower-tier corporation of S, the group may 
rely on a written notification provided by the prior group. Nothing in 
this paragraph shall be construed as permitting a group to increase the 
amount of any loss carryover deemed to expire (or reduce the amount of 
any loss carryover deemed not to expire) as a result of the election 
made pursuant to paragraph (b)(4) of this section.
    (B) Inadvertent waivers of loss carryovers previously subject to an 
election described in Sec.  1.1502-20(g). If, in connection with the 
acquisition of S, the group made an election pursuant to paragraph 
(b)(4) of this section to waive loss carryovers of S by identifying the 
amount of each loss carryover deemed not to expire, the prior group 
elected to determine the amount of the allowable loss or the basis 
reduction required with respect to the stock of S or a higher-tier 
corporation of S by applying the provisions described in Sec.  1.1502-
20(i)(2)(i) or (ii), and the amount of S's loss carryovers treated as 
reattributed to the prior group pursuant to the election described in 
Sec.  1.1502-20(g) is reduced pursuant to Sec.  1.1502-20(i)(3), then 
the group may amend its election made pursuant to paragraph (b)(4) of 
this section to provide that all or a portion of the loss carryovers of 
S that are treated as loss carryovers of S as a result of the prior 
group's election to apply the provisions described in Sec.  1.1502-
20(i)(2)(i) or (ii) are deemed not to expire. This paragraph 
(b)(4)(vii)(B), however, does not permit a group to reduce the amount 
of any loss carryover deemed not to expire as a result of the election 
made pursuant to paragraph (b)(4) of this section.
    (C) Time and manner of amending an election under Sec.  1.1502-
32(b)(4). The amendment of an election made pursuant to paragraph 
(b)(4) of this section must be made in a statement entitled Amendment 
of Election to Treat Loss Carryover as Expiring Under Sec.  1.1502-
32(b)(4) Pursuant to Sec.  1.1502-32(b)(4)(vii). The statement must be 
filed with or as part of any timely filed (including extensions) 
original return for the taxable year that includes August 26, 2004, or 
with or as part of an amended return filed before the date the original 
return for the taxable year that includes August 26, 2004, is due (with 
regard to extensions). A separate statement shall be filed for each 
election made pursuant to paragraph (b)(4) of this section that is 
being amended pursuant to this paragraph (b)(4)(vii). For purposes of 
making this statement, the group may rely on the statements set forth 
in a written notification provided by the prior group. The statement 
filed under this paragraph must include the following--
    (1) The name and employer identification number (E.I.N.) of S;
    (2) In the case of an amendment made pursuant to paragraph 
(b)(4)(vii)(A), a statement that the group has received a written 
notification from the prior group confirming that the group's prior 
election or elections pursuant to paragraph (b)(4) of this section had 
the effect of either increasing the prior group's allowable loss on the 
disposition of subsidiary stock or reducing the prior group's amount of 
basis reduction required;
    (3) The amount of each loss carryover of S deemed to expire (or the 
amount of loss carryover deemed not to expire) as set forth in the 
election made pursuant to paragraph (b)(4) of this section;
    (4) The amended amount of each loss carryover of S deemed to expire 
(or the amended amount of loss carryover deemed not to expire); and
    (5) In the case of an amendment made pursuant to paragraph 
(b)(4)(vii)(A) of this section, a statement that the aggregate amount 
of loss carryovers of S and any higher- and lower-tier corporation of S 
that will be treated as not expiring as a result of amendments made 
pursuant to paragraph (b)(4)(vii)(A) of this section will not exceed 
the amount described in Sec.  1.1502-20(c)(1)(iii) with respect to the 
acquired stock (computed without regard to the effect of the group's 
election or elections pursuant to paragraph (b)(4) of this section, but 
with regard to the effect of the prior group's election pursuant to 
Sec.  1.1502-20(g), if any, prior to the application of Sec.  1.1502-
20(i)(3)).
    (D) Items taken into account in open years. An amendment to an 
election made pursuant to paragraph (b)(4) of this section affects the 
group's items of income, gain, deduction, or loss only to the extent 
that the amendment gives rise, directly or indirectly, to items or 
amounts that would properly be taken into account in a year for which 
an assessment of deficiency or a refund for overpayment, as the case 
may be, is not prevented by any law or rule of law. Under this 
paragraph, if the year to which a loss previously deemed to expire as a 
result of an election made pursuant to paragraph (b)(4) of this section 
is deemed not to expire as a result of an election made pursuant to 
this paragraph would have been carried back or carried forward is a 
year for which a refund of overpayment is prevented by law, then to the 
extent that the absorption of such loss in such year would have 
affected the tax treatment of another item (e.g., another loss that was 
absorbed in such year) that has an effect in a year for which a refund 
of overpayment is not prevented by any law or rule of law, the 
amendment to the election made pursuant to paragraph (b)(4) of this 
section will affect the treatment of such other item. Therefore, if the 
absorption of such loss (the first loss) in a year for which a refund 
of overpayment is prevented by law would have prevented the absorption 
of another loss (the second loss) in such year and such second loss 
would have been carried to and used in a year for which a refund of 
overpayment is not prevented by any law or rule of law (the other 
year), the amendment of the election makes the second loss available 
for use in the other year.
    (E) Higher- and lower-tier corporations of S. A higher-tier 
corporation of S is a corporation that was a member of the prior group 
and, as a result of such higher-tier corporation becoming a member of 
the group; S became a member of the group. A lower-tier corporation of 
S is a corporation that was a member of the prior group and became a 
member of the group as a result of S becoming a member of the group.
    (F) Effective date. This paragraph (b)(4)(vii) is applicable on and 
after March 3, 2005. For prior periods, see Sec.  1.1502-32T(b)(4)(vii) 
as contained in the 26 CFR part 1 in effect on March 2, 2005.
* * * * *

0
Par. 7. In Sec.  1.1502-32T, paragraphs (b)(4)(v) and (b)(4)(vii) are 
revised to read as follows:


Sec.  1.1502-32T  Investment adjustments (temporary).

* * * * *
    (b) * * *
    (4) * * *
    (v) For further guidance see Sec.  1.1502-32(b)(4)(v).
    (vi) * * *
    (vii) For further guidance see Sec.  1.1502-32(b)(4)(vii).
* * * * *

0
Par. 8. The following sections in the table below are amended by 
revising

[[Page 10327]]

``Sec.  1.337(d)-2T'' to read ``Sec.  1.337(d)-2,'' each time it 
appears in the paragraph:

------------------------------------------------------------------------
            Section                     Remove                Add
------------------------------------------------------------------------
Sec.   1.267(f)-1(k)..........  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.597-4(g)(2)(v).......  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-11(b)(3)(ii)(c).  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-12(r)...........  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-15(b)(2)(iii)...  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-35T(b)(6)(ii)...  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-35T(c)(9).......  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
Sec.   1.1502-91(h)(2)........  Sec.   1.337(d)-2T...  Sec.   1.337(d)-
                                                        2.
------------------------------------------------------------------------

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 9. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

0
Par. 10. In Sec.  602.101, paragraph (b) is amended by removing the 
entry for Sec.  1.337(d)-2T and adding entries to the table in 
numerical order to read, in part, as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                               Current
     CFR part or section where identified and described      OMB control
                                                                 No.
------------------------------------------------------------------------
 
                                * * * * *
1.337(d)-2.................................................    1545-1774
 
                                * * * * *
1.1502-20..................................................    1545-1774
 
                                * * * * *
1.1502-32..................................................    1545-1774
 
                                * * * * *
------------------------------------------------------------------------


Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
    Approved: February 18, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 05-3951 Filed 3-2-05; 8:45 am]
BILLING CODE 4830-01-P