[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1337-1]

[Page 659]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1337-1  Determination of tax benefits from allowable deductions.

    (a) That part of the aggregate of the deductions allowed a taxpayer 
for any taxable year on account of war losses under section 127(a) of 
the Internal Revenue Code of 1939 which, if disallowed, would not result 
in an increase in the normal tax, surtax (including the tax imposed by 
section 102 of the Internal Revenue Code of 1939), or victory tax of 
taxpayer, or of any tax imposed in lieu of such taxes or of any tax 
imposed by chapter 2 of the Internal Revenue Code of 1939, for the 
taxable year in which such deductions are allowed or in any other 
taxable year, such as a taxable year in which the taxpayer's income tax 
is computed by reference to a carryover or carryback of net operating 
losses from the taxable year in which such deductions are allowed, is 
considered, for the purposes of section 127(a) of the Internal Revenue 
Code of 1939 an allowable deduction for the taxable year which did not 
result in a reduction of any tax of the taxpayer under chapter 1 or 2 of 
the Internal Revenue Code of 1939. In the case of recoveries of war 
losses and other items to which the recovery exclusion provisions of 
section 111 apply, such as bad debts, the determination of the tax 
benefit should be made in accordance with section 111(b) and the 
regulations thereunder. The deductions allowed a taxpayer for any 
taxable year on account of war losses are all the deductions on account 
of war losses which were claimed by the taxpayer in a return, in a claim 
for credit or refund of an overpayment, or in a petition to The Tax 
Court of the United States with respect to such taxable year and which 
were not disallowed, and all deductions on account of war losses which, 
although not so claimed by the taxpayer, were nevertheless allowed (for 
example, by the Commissioner, a court, or The Tax Court) in computing a 
tax of the taxpayer.
    (b) Any deduction allowable for a taxable year on account of a war 
loss under section 127(a) of the Internal Revenue Code of 1939 which was 
not claimed by the taxpayer for such year in a return, a claim for 
credit or refund of an overpayment, or a petition to the Tax Court of 
the United States and was not allowed as a deduction (for example, by 
the Commissioner, a court, or the Tax Court) in computing his tax for 
such year or for any other year is considered a deduction which did not 
result in a reduction of any tax of the taxpayer under chapter 1 or 2 of 
the Internal Revenue Code of 1939, since it is an allowable deduction 
which was not allowed in computing any tax of the taxpayer. If the 
taxpayer claimed for any taxable year a deduction on account of a war 
loss, and if such deduction was disallowed, the taxpayer may not 
subsequently contend for the purposes of section 1331 that such 
deduction was an allowable deduction for such taxable year.
    (c) If the taxpayer elected under section 127(b) of the Internal 
Revenue Code of 1939 to decrease the amount of a war loss by treating 
the obligations and liabilities described in that section as discharged 
or satisfied out of the property destroyed or seized, and if the 
taxpayer establishes that any of the obligations and liabilities were 
not so discharged or satisfied, then the amount by which such continuing 
obligations and liabilities decreased the war loss shall be considered 
an allowable deduction for the taxable year in which the war loss was 
sustained which did not result in a reduction of any tax of the taxpayer 
under chapter 1 or 2 of the Internal Revenue Code of 1939.

[T.D. 6500, 25 FR 12048, Nov. 26, 1960]

                             Claim of Right