[Code of Federal Regulations]
[Title 26, Volume 12]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1502-12]

[Page 264-265]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1502-12  Separate taxable income.

    The separate taxable income of a member (including a case in which 
deductions exceed gross income) is computed in accordance with the 
provisions of the Code covering the determination of taxable income of 
separate corporations, subject to the following modifications:
    (a) Transactions between members and transactions with respect to 
stock, bonds, or other obligations of members shall be reflected 
according to the provisions of Sec. 1.1502-13;
    (b) Any deduction which is disallowed under Sec. Sec. 1.1502-15A 
or 1.1502-15 shall be taken into account as provided in those sections;
    (c) The limitation on deductions provided in section 615(c) or 
section 617(h) shall be taken into account as provided in Sec. 1.1502-
16;
    (d) The method of accounting under which such computation is made 
and the adjustments to be made because of any change in method of 
accounting shall be determined under Sec. 1.1502-17;
    (e) Inventory adjustments shall be made as provided in Sec. 1.1502-
18;
    (f) Any amount included in income under Sec. 1.1502-19 shall be 
taken into account;
    (g) In the computation of the deduction under section 167, property 
shall not lose its character as new property as a result of a transfer 
from one member to another member during a consolidated return year if:
    (1) The transfer occurs on or before January 4, 1973, or
    (2) The transfer occurs after January 4, 1973, and the transfer is 
an intercompany transaction as defined in Sec. 1.1502-13 or the basis 
of the property in the hands of the transferee is determined (in whole 
or in part) by reference to its basis in the hands of the transferor;
    (h) No net operating loss deduction shall be taken into account;
    (i) [Reserved]
    (j) No capital gains or losses shall be taken into account;
    (k) No gains and losses subject to section 1231 shall be taken into 
account;
    (l) No deduction under section 170 with respect to charitable 
contributions shall be taken into account;
    (m) No deduction under section 922 (relating to the deduction for 
Western Hemisphere trade corporations) shall be taken into account;
    (n) No deductions under section 243(a)(1), 244(a), 245, or 247 
(relating to deductions with respect to dividends received and dividends 
paid) shall be taken into account;
    (o) Basis shall be determined under Sec. Sec. 1.1502-31 and 1.1502-
32, and earnings and profits shall be determined under Sec. 1.1502-33; 
and
    (p) The limitation on deductions provided in section 613A shall be 
taken into account for each member's oil and gas properties as provided 
in Sec. 1.1502-44.
    (q) A thrift institution's deduction under section 593(b)(2) 
(relating to the addition to the reserve for bad debts of a thrift 
institution under the percentage of taxable income method) shall be 
determined under Sec. 1.1502-42.
    (r) See Sec. Sec. 1.337(d)-2T and 1.1502-35T(f) for rules relating 
to basis adjustments

[[Page 265]]

and allowance of stock loss on dispositions of stock of a subsidiary 
member.

(Secs. 1502 and 7805 of the Internal Revenue Code of 1954 (68A Stat. 
637; 917; 26 U.S.C. 1502, 7805))

[T.D. 6894, 31 FR 11794, Sept. 8, 1966, as amended by T.D. 7191, 37 FR 
12949, June 30, 1972; T.D. 7246, 38 FR 760, Jan. 4, 1973; T.D. 7725, 45 
FR 65561, Oct. 3, 1980; T.D. 7876, 48 FR 11258, Mar. 17, 1983; T.D. 
8294, 55 FR 9434, Mar. 14, 1990; T.D. 8319, 55 FR 49038, Nov. 26, 1990; 
T.D. 8364, 56 FR 47401, Sept. 19, 1991; T.D. 8597, 60 FR 36679, July 18, 
1995; T.D. 8677, 61 FR 33323, June 27, 1996; T.D. 8823, 64 FR 36099, 
July 2, 1999; T.D. 9048, Mar. 14, 2003]