[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.108-3]

[Page 475-476]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.108-3  Intercompany losses and deductions.

    (a) General rule. This section applies to certain losses and 
deductions from the sale, exchange, or other transfer of property 
between corporations that are members of a consolidated group or a 
controlled group (an intercompany transaction). See section 267(f) 
(controlled groups) and Sec. 1.1502-13 (consolidated groups) for 
applicable definitions. For purposes of determining the attributes to 
which section 108(b) applies, a loss or deduction not yet taken into 
account under section 267(f) or Sec. 1.1502-13 (an intercompany loss or 
deduction) is treated as basis described in section 108(b) that the 
transferor retains in property. To the extent a loss not yet taken into 
account is reduced under this section, it cannot subsequently be taken 
into account under section 267(f) or Sec. 1.1502-13. For example, if S 
and B are corporations filing a consolidated return, and S sells land 
with a $100 basis to B for $90 and the $10 loss is deferred under 
section 267(f) and

[[Page 476]]

Sec. 1.1502-13, the deferred loss is treated for purposes of section 
108(b) as $10 of basis that S has in land (even though S has no 
remaining interest in the land sold to B) and is subject to reduction 
under section 108(b)(2)(E). Similar principles apply, with appropriate 
adjustments, if S and B are members of a controlled group and S's loss 
is deferred only under section 267(f).
    (b) Effective date. This section applies with respect to discharges 
of indebtedness occurring on or after September 11, 1995.

[T.D. 8597, 60 FR 36680, July 18, 1995]