Internal Revenue Bulletin 2003-13 (PDF rendition): IRS Revenue Rulings

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2003–25, page 642.
Fringe benefits aircraft valuation formula.For purposes of
section 1.61–21(g) of the regulations, the Standard Industry Fare
Level (SIFL) cents-per-mile rates and terminal charge in effect for
the first half of 2003 are set forth for determining the value of
non-commercial flights on employer-provided aircraft.
Rev. Rul. 2003–30, page 659.
Interest rates; underpayments and overpayments.The rate
of interest determined under section 6621 of the Code for the
calendar quarter beginning April 1, 2003, will be 5 percent for
overpayments (4 percent in the case of a corporation), 5 per-
cent for underpayments, and 7 percent for large corporate un-
derpayments. The rate of interest paid on the portion of a
corporate overpayment exceeding $10,000 will be 2.5 per-
cent.
Rev. Rul. 2003–31, page 643.
Constructive sales, short sales, transition rule.This ruling
provides guidance on whether changes made to a margin ac-
count through which a short sale was effectuated will (1) cause
the short sale to be deemed consummated under section
1.1233–1(a)(4) of the regulations, and (2) cause the short-
against-the-box transaction to cease to be covered by the tran-
sition rule in the Taxpayer Relief Act of 1997.
Rev. Rul. 2003–33, page 642.
LIFO; price indexes; department stores.The January 2003
Bureau of Labor Statistics price indexes are accepted for use by
department stores employing the retail inventory and last-in, first-
out inventory methods for valuing inventories for tax years ended
on, or with reference to, January 31, 2003.
T.D. 9048, page 644.
REG–131478–02, page 669.
Final, temporary, and proposed regulations under section 1502
of the Code redetermine the basis of stock of a subsidiary mem-
ber of a consolidated group immediately prior to certain trans-
fers of such stock and certain deconsolidations of a subsidiary
member. In addition, the temporary regulations suspend cer-
tain losses recognized on the disposition of stock of a subsid-
iary member. A public hearing on the proposed regulations is
scheduled for June 20, 2003.
Rev. Proc. 2003–26, page 666.
Guidance is provided to individuals who fail to meet the eligibil-
ity requirements of section 911(d)(1) of the Code because ad-
verse conditions in a foreign country preclude the individual from
meeting those requirements. A current list of countries and the
dates those countries are subject to the section 911(d)(4) waiver
is provided. Rev. Proc. 2002–20 supplemented.
Rev. Proc. 2003–27, page 667.
This procedure provides guidance on the information reporting
requirements under section 6050I of the Code for small cash
transactions that involve the rental of taxicabs on a daily shift ba-
sis.
ADMINISTRATIVE
Announcement 2003–18, page 675.
This document extends the relief from interest and penalties un-
der section 7508A of the Code granted by Notice 2002–40,
2002–24 I.R.B. 1152, to certain decedents’ estates that were
affected by the September 11, 2001, terrorist attack.
Bulletin No. 2003–13
March 31, 2003
Announcements of Disbarments and Suspensions begin on page 671.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying
the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of the
Commissioner of Internal Revenue for announcing official rul-
ings and procedures of the Internal Revenue Service and for pub-
lishing Treasury Decisions, Executive Orders, Tax Conventions,
legislation, court decisions, and other items of general inter-
est. It is published weekly and may be obtained from the Super-
intendent of Documents on a subscription basis. Bulletin contents
are consolidated semiannually into Cumulative Bulletins, which
are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, modify,
or amend any of those previously published in the Bulletin. All pub-
lished rulings apply retroactively unless otherwise indicated. Pro-
cedures relating solely to matters of internal management are
not published; however, statements of internal practices and pro-
cedures that affect the rights and duties of taxpayers are pub-
lished.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpay-
ers or technical advice to Service field offices, identifying de-
tails and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be re-
lied on, used, or cited as precedents by Service personnel in the
disposition of other cases. In applying published rulings and pro-
cedures, the effect of subsequent legislation, regulations, court
decisions, rulings, and procedures must be considered, and Ser-
vice personnel and others concerned are cautioned against reach-
ing the same conclusions in other cases unless the facts and
circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these sub-
jects are contained in the other Parts and Subparts. Also in-
cluded in this part are Bank Secrecy Act Administrative Rulings.
Bank Secrecy Act Administrative Rulings are issued by the De-
partment of the Treasury’s Office of the Assistant Secretary (En-
forcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the first Bulletin of the succeeding semiannual pe-
riod, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
March 31, 20032003–13 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 61.—Gross Income
Defined
26 CFR 1.61–21: Taxation of fringe benefits.
Fringe benefits aircraft valuation for-
mula.For purposes of section 61 of the
Code, relating to the rule for valuing non-
commercial flights on employer-provided
aircraft, the Standard Industry Fare Level
(SIFL) cents-per-mile rates and terminal
charge in effect for the first half of 2003
are set forth.
Rev. Rul. 2003–25
For purposes of the taxation of fringe
benefits under section 61 of the Internal
Revenue Code, section 1.61–21(g) of the
Income Tax Regulations provides a rule for
valuing noncommercial flights on employer-
provided aircraft. Section 1.61–21(g)(5) pro-
vides an aircraft valuation formula to
determine the value of such flights. The
value of a flight is determined under the
base aircraft valuation formula (also known
as the Standard Industry Fare Level for-
mula or SIFL) by multiplying the SIFL
cents-per-mile rates applicable for the pe-
riod during which the flight was taken by
the appropriate aircraft multiple provided
in section 1.61–21(g)(7) and then adding the
applicable terminal charge. The SIFL cents-
per-mile rates in the formula and the ter-
minal charge are calculated by the
Department of Transportation and are re-
viewed semi-annually.
The following chart sets forth the ter-
minal charges and SIFL mileage rates:
Period During Which
the Flight Is Taken
Terminal
Charge
SIFL Mileage
Rates
1/1/03 – 6/30/03$37.76Up to 500 miles
= $.2065 per mile
501–1500 miles
= $.1575 per mile
Over 1500 miles
= $.1514 per mile
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Kathleen Edmondson of the Office
of Division Counsel/Associate Chief Coun-
sel (Tax Exempt and Government Enti-
ties). For further information regarding this
revenue ruling, contact Ms. Edmondson at
(202) 622–6040 (not a toll-free call).
Section 472.—Last-in, First-
out Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The January 2003 Bureau of La-
bor Statistics price indexes are accepted for
use by department stores employing the re-
tail inventory and last-in, first-out inven-
tory methods for valuing inventories for tax
years ended on, or with reference to, Janu-
ary 31, 2003.
Rev. Rul. 2003–33
The following Department Store Inven-
tory Price Indexes for January 2003 were
issued by the Bureau of Labor Statistics.
The indexes are accepted by the Internal
Revenue Service, under § 1.472–1(k) of the
Income Tax Regulations and Rev. Proc. 86–
46, 1986–2 C.B. 739, for appropriate ap-
plication to inventories of department stores
employing the retail inventory and last-
in, first-out inventory methods for tax years
ended on, or with reference to, January 31,
2003.
The Department Store Inventory Price
Indexes are prepared on a national basis
andinclude (a) 23 major groups of depart-
ments, (b) three special combinations of the
major groups — soft goods, durable goods,
and miscellaneous goods, and (c) a store to-
tal, which covers all departments, includ-
ing some not listed separately, except for
the following: candy, food, liquor, tobacco,
and contract departments.
2003–13 I.R.B.642March 31, 2003

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
GroupsJan. 2002Jan. 2003
Percent Change
from Jan. 2002
to Jan. 2003
1
1.Piece Goods ..............................................................................479.8465.2-3.0
2.Domestics and Draperies ..........................................................588.3566.8-3.7
3.Women’s and Children’s Shoes ...............................................607.3648.46.8
4.Men’s Shoes..............................................................................875.0876.70.2
5.Infants’Wear .............................................................................602.2593.8-1.4
6.Women’s Underwear.................................................................556.8524.0-5.9
7.Women’s Hosiery......................................................................350.3339.8-3.0
8.Women’s and Girls’Accessories..............................................559.0549.7-1.7
9.Women’s Outerwear and Girls’Wear ......................................350.2338.3-3.4
10.Men’s Clothing .........................................................................565.6550.9-2.6
11.Men’s Furnishings ....................................................................586.5567.3-3.3
12.Boys’Clothing and Furnishings...............................................467.1427.1-8.6
13.Jewelry ......................................................................................918.2866.4-5.6
14.Notions ......................................................................................770.1782.81.6
15.Toilet Articles and Drugs..........................................................969.1971.10.2
16.Furniture and Bedding ..............................................................625.9626.30.1
17.Floor Coverings ........................................................................630.4593.0-5.9
18.Housewares ...............................................................................757.8736.4-2.8
19.Major Appliances ......................................................................227.0220.0-3.1
20.Radio and Television ................................................................51.947.1-9.2
21.Recreation and Education
2
.......................................................88.184.2-4.4
22.Home Improvements
2
...............................................................124.6125.50.7
23.Auto Accessories
2
.....................................................................110.5112.01.4
Groups 1–15: Soft Goods .....................................................................566.2552.0-2.5
Groups 16–20: Durable Goods .............................................................417.1403.0-3.4
Groups 21–23: Misc. Goods
2
...............................................................97.595.3-2.3
Store Total
3
................................................................................511.5497.8-2.7
1
Absence of a minus sign before the percentage change in this column signifies a price increase.
2
Indexes on a January 1986 = 100 base
3
The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco and contract depart-
ments.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Michael Burkom of the Office of As-
sociate Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue ruling, contact
Mr. Burkom at (202) 622–7718 (not a toll-
free call).
Section 1259.—Constructive
Sales Treatment for Appreci-
ated Financial Positions
(Also§1233; 26 CFR 1.1233–1.)
Constructive sales, short sales, tran-
sition rule.This ruling provides guidance
on whether changes made to a margin ac-
count through which a short sale was ef-
fectuated will (1) cause the short sale to be
deemed consummated under section
1.1233–1(a)(4) of the regulations, and (2)
cause the short-against-the-box transac-
tion to cease to be covered by the transi-
tion rule in the Taxpayer Relief Act of 1997.
March 31, 20036432003–13 I.R.B.

Rev. Rul. 2003–31
ISSUES
(1) Will changes to the terms of a mar-
gin account through which a short sale was
effectuated cause the short sale to be con-
summated for purposes of§1.1233–1(a)(4)
of the Income Tax Regulations?
(2) If a taxpayer’s pre-June 9, 1997, ap-
preciated financial position and short-
against-the-box transaction are not taken into
account for purposes of applying§1259 of
the Internal Revenue Code to post-June 8,
1997, transactions, as provided by the tran-
sition rule in§1001(d)(2) of the Taxpayer
Relief Act of 1997, 1997–4 (Vol. 1) C.B.
1, 121, will changes to the terms of the mar-
gin account through which the short sale
was effectuated cause the transition rule to
cease to apply?
FACTS
In January 1997, TaxpayerTPowned
100 shares ofXYZstock (theXYZstock).
TPestablished a securities trading account
(the Margin Account) with Broker, who
charged interest and fees with respect to the
Margin Account. In May 1997, at a time
when theXYZstock was appreciated,TP
effected a short sale (the Short Sale) of 100
shares ofXYZstock through Broker, who
borrowed the 100 shares ofXYZstock to
make delivery. Before September 4, 1997,
TPclearly identified theXYZstock and the
Short Sale in its books and records as off-
setting positions.
In January 2002, Broker andTPnego-
tiated changes to the interest rates and fees
associated with the Margin Account.
TPcontinues to hold theXYZstock and
has not delivered any other shares to Bro-
ker to close the Short Sale.
LAW
Section 1.1233–1(a)(1) provides that, for
income tax purposes, a short sale is not
deemed to be consummated until deliv-
ery of property to close the short sale. Pur-
suant to§1.1233–1(a)(4), if a taxpayer
makes a short sale through a broker and the
broker borrows property to make the de-
livery on the short sale, the short sale is not
deemed to be consummated until the ob-
ligation of the selling taxpayer that is cre-
ated by the short sale is finally discharged
by delivery of property to the broker to re-
place the property that the broker borrowed.
Section 1259(a)(1) provides that if there
is a constructive sale of an appreciated fi-
nancial position, the taxpayer shall recog-
nize gain as if such position were sold,
assigned, or otherwise terminated at its fair
market value on the date of such construc-
tive sale. Appreciated financial position is
defined in§1259(b)(1) as including a po-
sition with respect to stock if there would
be gain were such position sold, assigned,
or otherwise terminated at its fair market
value. Pursuant to§1259(c)(1)(A), a tax-
payer is treated as having made a construc-
tive sale of an appreciated financial position
if the taxpayer enters into a short sale of
the same or substantially identical prop-
erty.
Under§1001(d)(2) of the Taxpayer Re-
lief Act of 1997 (the transition rule), if“be-
fore June 9, 1997, the taxpayer entered into
any transaction which is a constructive sale
of any appreciated financial position, and
. . . before the close of the 30-day period
beginning on the date of the enactment of
this Act [August 5, 1997] or before such
later date as may be specified by the Sec-
retary of the Treasury, such transaction and
position are clearly identified in the tax-
payer’s records as offsetting, such trans-
action and position shall not be taken into
account in determining whether any other
constructive sale after June 8, 1997, has oc-
curred.”The transition rule ceases to ap-
ply as of the date such transaction is closed
or the taxpayer ceases to hold the posi-
tion.§1001(d)(2) of the Taxpayer Relief Act
of 1997, 1997–4 (Vol. 1) C.B. 1, 121.
ANALYSIS
(1) Section 1233
At the time of the changes to the Mar-
gin Account,TPhad not delivered stock to
Broker to close the Short Sale, and no such
stock was delivered in connection with the
changes. The Short Sale, therefore, is not
consummated for purposes of§1.1233–
1(a)(4).
(2) Section 1259 Transition Rule
In May 1997, when theXYZstock was
appreciated,TPentered into the Short Sale.
Thus,TPentered into a transaction that is
described in§1259(c)(1). Because the Short
Sale was entered into before June 9, 1997,
however, no gain was recognized under
§1259(a)(1).
Furthermore, before the close of the 30-
day period beginning on August 5, 1997,
TPclearly identified theXYZstock and the
Short Sale in its books and records as off-
setting positions. Thus, theXYZstock and
the Short Sale fell within the transition rule,
and, untilTPeither ceases to hold theXYZ
stock or closes the Short Sale, neither the
XYZstock nor the Short Sale is taken into
account in determining whether some new
transaction has caused a constructive sale
under§1259(a)(1).
At the time of the changes to the Mar-
gin Account,TPcontinued to hold theXYZ
stock and the Short Sale had not been con-
summated for purposes of§1.1233–1(a)(4).
Accordingly, the transition rule continues
to apply to the Short Sale and theXYZ
stock.
HOLDINGS
(1) Because the changes made to the
terms of the Margin Account do not con-
stitute a delivery of theXYZstock, the
changes do not cause the Short Sale to be
consummated for purposes of§1.1233–
1(a)(4).
(2) Because the changes made to the
terms of the Margin Account do not con-
stitute a delivery of theXYZstock, the
changes do not cause the transition rule to
cease to apply to either the Short Sale or
theXYZstock.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Kate Sleeth of the Office of Asso-
ciate Chief Counsel (Financial Institutions
and Products). For further information re-
garding this revenue ruling, contact
Ms. Sleeth at (202) 622–3920 (not a toll-
free call)
Section 1502.—Regulations
26 CFR 1.1502–21: Net operating losses.
2003–13 I.R.B.644March 31, 2003

T.D. 9048
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Guidance Under Section
1502; Suspension of Losses
on Certain Stock Dispositions
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains fi-
nal and temporary regulations under sec-
tion 1502 that redetermine the basis of stock
of a subsidiary member of a consolidated
group immediately prior to certain trans-
fers of such stock and certain deconsoli-
dations of a subsidiary member. In addition,
this document contains temporary regula-
tions that suspend certain losses recog-
nized on the disposition of stock of a
subsidiary member. The regulations ap-
ply to corporations filing consolidated re-
turns. The text of the temporary regulations
serves as the text of the proposed regula-
tions (REG–131478–02) on page 669 of this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective March 14, 2003.
Applicability Date:For dates of appli-
cability, see§§1.1502–21T(h)(7), 1.1502–
32T(h)(6), and 1.1502–35T(j).
FORFURTHERINFORMATION
CONTACT: Aimee K. Meacham, (202)
622–7530 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These regulations are being issued with-
out prior notice and public procedure pur-
suant to the Administrative Procedure Act
(5 U.S.C. 553). For this reason, the col-
lection of information contained in these
temporary regulations has been reviewed
and, pending receipt and evaluation of pub-
lic comments, approved by the Office of
Management and Budget (OMB) under 44
U.S.C. 3507 and assigned control number
1545–1828. Responses to this collection of
information are voluntary.
An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information unless
the collection of information displays a valid
OMB control number.
For further information concerning this
collection of information, and where to sub-
mit comments on the collection of infor-
mation and the accuracy of the estimated
burden, and suggestions for reducing this
burden, please refer to the cross-referencing
notice of proposed rulemaking published in
this issue of the Bulletin.
Books or records relating to a collec-
tion 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 and Explanation of
Provisions
On October 18, 2002, the IRS and Trea-
sury Department issued a notice of pro-
posed rulemaking (REG–131478–02,
2002–47 I.R.B. 892 [67 F.R. 65060]) that
included proposed regulations reflecting the
principle set forth in Notice 2002–18,
2002–12 I.R.B. 644, that a consolidated
group should not be able to obtain more
than one tax benefit from a single eco-
nomic loss. The rules in the proposed regu-
lations were intended to address at least two
situations in which a group may obtain
more than one tax benefit from a single eco-
nomic loss. In one situation, a group first
recognizes and absorbs a subsidiary mem-
ber’s inside loss (e.g., a loss carryforward,
a deferred deduction, or a loss inherent in
an asset) and a member of the group later
recognizes a loss on the subsidiary mem-
ber’s stock that is duplicative of the pre-
viously recognized and absorbed inside loss.
In the second situation, a member of the
group recognizes a loss on a non-
deconsolidating disposition of the subsid-
iary member’s stock, the stock loss
duplicates an unrecognized or unabsorbed
loss of the subsidiary member, and the
group later recognizes and absorbs the sub-
sidiary’s inside loss.
The proposed regulations consist pri-
marily of two rules: a basis redetermina-
tion rule and a loss suspension rule. The
proposed regulations also include a basis re-
duction rule that addresses certain cases of
loss duplication that are not within the scope
of the loss suspension rule, such as losses
arising from the worthlessness of subsid-
iary member stock.
No public hearing regarding the pro-
posed regulations was requested or held.
Comments, however, were submitted.
The IRS and Treasury Department have
studied, and are continuing to study, the
comments received. The IRS and Trea-
sury Department believe that the com-
ments received, as well as the issues more
generally raised by Notice 2002–18 and the
proposed regulations, require significant fur-
ther consideration. Accordingly, the IRS and
Treasury Department will continue to study
these issues and, as more fully set forth be-
low, request comments on, and sugges-
tions for possible alternative approaches to,
the issues addressed in the regulations.
Nonetheless, the IRS and Treasury Depart-
ment believe that immediately effective
rules are necessary to address the duplica-
tion of loss within a consolidated group so
as to clearly reflect the income tax liabil-
ity of the group. Accordingly, the IRS and
Treasury Department are promulgating the
proposed regulations as temporary regula-
tions in this Treasury decision. The tem-
porary regulations are substantially similar
to the proposed regulations, but reflect cer-
tain revisions that were made based on
comments received. The following sec-
tions describe these revisions.
A.Application of Basis Redetermination
Rule Upon Deconsolidation of a
Subsidiary Member
The proposed regulations require the re-
allocation of the basis of subsidiary mem-
ber stock held by members of the group
upon certain dispositions and deconsolida-
tions of subsidiary member stock. The rule
applies differently when the subsidiary re-
mains a member of the group from when
the subsidiary does not remain a member
of the group. The IRS and Treasury De-
partment received several technical com-
ments regarding the basis redetermination
rule applicable when a subsidiary mem-
ber leaves the group. The temporary regu-
lations revise that rule in a manner that
addresses these comments and clarifies its
application.
In particular, under the temporary regu-
lations, subject to certain exceptions, the rule
applies upon a deconsolidation of a sub-
March 31, 20036452003–13 I.R.B.

sidiary member when any stock of the sub-
sidiary member owned by a member of the
group has a basis in excess of value. The
revised rule generally applies regardless of
whether the subsidiary member is decon-
solidated as a result of a transfer of a gain
share, a transfer of a loss share, or a stock
issuance because, in each case, the effect
is the same,i.e., each share of subsidiary
member stock owned by group members is
deconsolidated. Further, in computing the
basis that is reallocated, the revised rule
takes into account all loss on members’
shares of the subsidiary’s stock and all prior
negative basis adjustments to members’
shares of the subsidiary stock that are not
loss shares. The revised rule reflects that,
unless all deconsolidations and all decon-
solidated shares are treated similarly, op-
portunities to duplicate losses will continue
to exist.
B.Application of Loss Suspension Rule
Under the loss suspension rule, if, af-
ter application of the basis redetermina-
tion rule, a member of a consolidated group
recognizes a loss on the disposition of stock
of a subsidiary member of the same group,
and the subsidiary member is a member of
the same group immediately after the dis-
position, then the selling member’s stock
loss is suspended to the extent of the du-
plicated loss with respect to such stock. Be-
cause a suspended stock loss reflects the
subsidiary member’s unrecognized or un-
absorbed deductions and losses, under the
proposed regulations, the suspended loss is
reduced, with the result that it will not later
be allowed, as the subsidiary member’s de-
ductions and losses are taken into account
(i.e., absorbed) in determining the group’s
consolidated taxable income (or loss). One
comment received regarding the proposed
regulations was that, in certain cases, the
loss suspension rule could disallow a tax
loss for an economic loss. This result was
not intended. Accordingly, these tempo-
rary regulations include two changes from
the proposed regulations that are intended
to prevent this result.
First, the temporary regulations pro-
vide that the amount by which a suspended
stock loss is reduced cannot exceed the ex-
cess of the amount of the subsidiary mem-
ber’s items of loss and deduction over the
amount of such items that are taken into ac-
count in determining the basis adjustments
made to stock of the subsidiary member (or
any successor) owned by members of the
group under the investment adjustment
rules.
Second, they also include a provision
stating that the loss suspension rule is not
to be applied in a manner that permanently
disallows an otherwise allowable deduc-
tion for an economic loss. Whether the loss
suspension rule has resulted in such a dis-
allowance is determined on the earlier of
the date of the deconsolidation of the sub-
sidiary (or any successor) the stock of which
gave rise to the suspended stock loss and
the date on which the stock of such sub-
sidiary is determined to be worthless. When
it is determined that the application of the
loss suspension rule has permanently dis-
allowed a deduction for an economic loss,
the taxpayer will be permitted to treat the
suspended stock loss as restored to the ex-
tent of such disallowance. The restoration
of the suspended loss is deemed to occur
immediately prior to the deconsolidation of
the subsidiary or the determination of
worthlessness.
C.Basis Reduction Rule For Worthless
Stock and Stock of a Subsidiary With No
Separate Return Year
The proposed regulations include a ba-
sis reduction rule intended to prevent the
duplication of unabsorbed losses gener-
ated by a subsidiary member and loss with
respect to the stock of that member if ei-
ther (i) the stock of the subsidiary mem-
ber becomes worthless or (ii) the stock of
the subsidiary is disposed of and, imme-
diately after the disposition, the subsid-
iary is no longer a member of the group and
does not have a separate return year. Un-
der this rule, immediately before a deter-
mination of worthlessness, or immediately
before a disposition of a subsidiary that is
not followed by a separate return year, the
basis of the subsidiary’s stock is reduced
by the amount of any loss carryforwards
that would be treated as attributable to the
subsidiary under the principles of§1.1502–
21. This provision was included because
neither situation was subject to the loss sus-
pension rule and, without such a rule, tax-
payers might take the position that a group
is entitled to a subsidiary member’s loss car-
ryforwards even after the group has en-
joyed full basis recovery through a
worthless stock or other deduction. Such a
result, however, would be in contraven-
tion of the principles of Notice 2002–18.
The proposed provision raised ques-
tions about the operation of the existing
rules governing this situation. Commenta-
tors contended that the basis reduction rule
could deny the group a single tax loss for
its economic loss. As stated above, the pro-
posed regulations, including the basis re-
duction rule, were not intended to disallow
a tax loss for an economic loss, but rather
were intended only to ensure that a group
obtains no more than a single tax loss for
an economic loss.
The temporary regulations address this
situation by providing that the unabsorbed
losses generated by the subsidiary do not
remain available to the group. Specifi-
cally, the temporary regulations provide that,
if stock of a subsidiary member is treated
as worthless under section 165 (taking into
account the provisions of§1.1502–80(c)),
or if a member of a group disposes of sub-
sidiary member stock and on the follow-
ing day the subsidiary is not a member of
the group and does not have a separate re-
turn year, then all losses treated as attrib-
utable to the subsidiary member under the
principles of§1.1502–21, after comput-
ing the taxable income of the group, the
subsidiary member, or a group of which the
subsidiary member was previously a mem-
ber for the taxable year that includes the de-
termination of worthlessness or the
disposition and any prior taxable year, shall
be treated as expired, but not as absorbed
by the group, as of the beginning of the
group’s taxable year that follows the tax-
able year that includes the determination of
worthlessness or the disposition. Under this
rule, the stock loss (or reduced stock gain),
unreduced by any loss carryforwards at-
tributable to the subsidiary member, is al-
lowed. Moreover, because the losses are
treated as expired, there is no possibility of
a later, duplicative use of the loss carry-
forwards. This approach is consistent with
the nature of a loss realized upon such a de-
termination or disposition,i.e., a loss on an
investment in the subsidiary member.
Because the provisions of the proposed
regulations raised questions about the op-
eration of the existing rules, the tempo-
rary regulations include a special election
for determinations of worthlessness and dis-
positions that occurred on or after March
7, 2002, and before March 14, 2003. In
such cases, as an alternative to the treat-
ment described above, the common par-
ent of the group may make an irrevocable
2003–13 I.R.B.646March 31, 2003

election to reattribute to itself all or a por-
tion of the losses attributable to the sub-
sidiary member under the principles of
§1.1502–21. For purposes of applying the
investment adjustment rules to stock of the
subsidiary member owned by the group, the
reattributed losses are treated as absorbed
by the group immediately prior to the al-
lowance of any loss or inclusion of any in-
come or gain with respect to the
determination of worthlessness or the dis-
position. The common parent, however, is
treated as succeeding to the subsidiary’s
losses in a transaction described in sec-
tion 381.
The IRS and Treasury Department re-
quest comments regarding whether a sub-
sidiary member the stock of which is
determined to be worthless (under the stan-
dards of§1.1502–80(c)) should be treated
as a new corporation for purposes of the In-
ternal Revenue Code as of the date of the
determination of worthlessness. In addi-
tion, the IRS and Treasury Department re-
quest comments regarding the desirability
of further clarification or changes regard-
ing the standards that govern determina-
tions of worthlessness and the deductibility
of losses (or the inclusion of excess loss ac-
counts) when stock of a subsidiary mem-
ber is determined to be worthless.
D.Deferral and Elimination of Gain
One comment noted that the basis re-
determination rule of the proposed regu-
lations could be used to shift the location
of gain and loss within a consolidated group
and even to eliminate gain in a manner that
is unintended and contrary to the purposes
underlying section 337(d). The following
example illustrates this concern.
P, the common parent of a consolidated
group, owns all of the stock of S1 and S2.
The S2 stock has a basis of $400 and a
value of $500. S1 owns 50% of the stock
of the S3 common stock with a basis of
$150 and value equal to such amount. S2
owns the remaining 50% of the S3 com-
mon stock with a basis of $100 and a value
of $200 and one share of S3 preferred stock
with a basis of $10 and a value of $9. P in-
tends to sell all of its S2 stock to an un-
related buyer that does not want to acquire
S3. P, therefore, engages in the following
steps to dispose of S2 without recogniz-
ing a substantial portion of the built-in gain
in S2. First, P causes a recapitalization of
S3 in which S2’s S3 common stock is ex-
changed for new S3 preferred shares. P then
sells all of its S2 stock. Although the sale
does not deconsolidate S3 (because all the
S3 common stock is still held by S1), it
does deconsolidate the S3 preferred shares
held by S2, including the one share with a
built-in loss. Accordingly, under the pro-
posed regulations, the bases of all shares of
S3 stock must be redetermined immedi-
ately before P’s sale of S2. Under the ba-
sis redetermination rule, the total basis of
S3 stock held by members of the P group
is allocated first to the S3 preferred shares,
up to their value of $209, and then to the
remaining shares of S3 common held by S1.
S2’s aggregate basis in the S3 preferred
stock is increased from $110 to $209. This
increase tiers up and increases P’s basis in
the S2 stock from $400 to $499. Accord-
ingly, P will recognize only $1 of gain on
the sale of its S2 stock. Afterwards, P can
cause S3 to redeem its preferred stock for
$209. S2 will recognize no gain or loss
from the redemption. Although the unrec-
ognized gain is preserved in P’s basis in S1,
and S1’s basis in S3, the group can defer
or avoid recognizing that gain.
In this case, there is no significant du-
plication of loss. Moreover, the steps were
structured with a view to avoiding the rec-
ognition of gain on a disposition of stock.
The IRS and Treasury Department do not
intend that the basis redetermination rule be
applied to defer or eliminate gain in such
cases. The IRS and Treasury Department
considered adopting a mechanical test to
prevent the application of the basis rede-
termination rule in such cases. They con-
cluded that such a rule would not provide
the flexibility necessary to obtain an ap-
propriate balancing of the concerns under-
lying this regulation and those underlying
section 337(d). Therefore, these tempo-
rary regulations include an anti-abuse rule
that provides that, if a transaction is struc-
tured with a view to, and has the effect of,
deferring or avoiding the recognition of gain
on a disposition of stock by invoking ap-
plication of the basis redetermination rule,
and the stock loss attributable to the trans-
ferred shares or the duplicated loss of the
subsidiary member that is reflected in sub-
sidiary member stock owned by members
of the group is not significant, the basis re-
determination and loss suspension rules will
not apply.
E.Request For Comments
As described above, the IRS and Trea-
sury Department are continuing to study the
comments received regarding the proposed
regulations. In addition, the IRS and Trea-
sury Department are considering alterna-
tive regimes that would prevent the
duplication of loss within the group.
In particular, the IRS and Treasury De-
partment are studying a comment that sug-
gested applying the principles of section
704(c) to allocate negative investment ad-
justments arising from loss items at the sub-
sidiary member level where there have been
transfers of loss property to the subsid-
iary member. The comment asserts that this
approach would address the case where the
recognition and absorption of the inside loss
precedes the recognition of the stock loss.
The IRS and Treasury Department are con-
cerned that this alternative approach ad-
dresses only duplicative losses that arise as
a result of contributions of loss property, not
duplicative losses that arise as a result of
a loss incurred by a subsidiary member. In
addition, the IRS and Treasury Depart-
ment are concerned that the application of
the principles of section 704(c) may be
complex, especially in cases where there
have been issuances of subsidiary mem-
ber stock at different times. The IRS and
Treasury Department request comments re-
garding how the principles of section 704(c)
should be applied in the consolidated re-
turn context to prevent the duplication of
loss.
The IRS and Treasury Department are
also studying a suggestion that the type of
transaction in which the stock loss is rec-
ognized prior to the absorption of the in-
side loss be addressed by a rule that allows
the stock loss but limits the use of the sub-
sidiary member’s items of loss and deduc-
tion if there have been contributions of loss
property with respect to the subsidiary
member and there is any loss duplication
at the subsidiary member level at the time
the stock loss is recognized. That rule would
not permit the use of the subsidiary’s items
of loss and deduction that are duplicative
of the stock loss to offset income of an-
March 31, 20036472003–13 I.R.B.

other member of the group, but would per-
mit such items to offset income of the
subsidiary.
This rule effectively would permit the
acceleration of stock loss. The IRS and
Treasury Department request comments re-
garding whether permitting such accelera-
tion would clearly reflect the income of the
group.
In addition, because this rule would per-
mit the subsidiary’s losses to offset its items
of income and gain, it would not prevent
the duplication of losses within the group
to that extent. The IRS and Treasury De-
partment request comments regarding
whether this duplication is appropriate given
that the benefits associated with the sub-
sidiary and its shareholder being mem-
bers of the group (e.g., positive basis
adjustments to the shareholder member’s
stock of the subsidiary member that re-
flect income of the subsidiary member and
the group’s ability to use the loss recog-
nized by another member to offset income
of the subsidiary member of the group) have
been enjoyed by the group.
Finally, this rule would address only
cases of duplication where there have been
contributions of loss property. As described
above, the IRS and Treasury Department are
concerned that contributions of loss prop-
erty are not the only types of transactions
in which a group can obtain more than one
tax benefit from a single economic loss.
The IRS and Treasury Department are
considering a variation of this suggested rule
to address the situation where the stock loss
is recognized prior to the absorption of the
inside loss. This variation would allow the
stock loss when recognized, but would dis-
allow the inside losses of the subsidiary to
the extent that such losses reflect losses that
were duplicate losses at the time of the rec-
ognition of the stock loss. Such losses may
be attributable to contributed property or
losses that arose in the subsidiary mem-
ber. The IRS and Treasury Department re-
quest comments regarding this variation.
Finally, the IRS and Treasury Depart-
ment continue to request comments regard-
ing any other approaches that could be
implemented to address the duplication of
loss within a consolidated group.
Special Analyses
InRite Aid Corp. v. United States, 255
F.3d 1357 (Fed. Cir. 2001), the United
States Court of Appeals for the Federal Cir-
cuit held that the duplicated loss compo-
nent of§1.1502–20 was an invalid exercise
of regulatory authority. In response to the
Rite Aiddecision, the IRS and Treasury De-
partment issued Notice 2002–11, 2002–7
I.R.B. 526, stating that the interests of sound
tax administration would not be served by
the continued litigation of the validity of the
duplicated loss component of§1.1502–
20. Notice 2002–11 also announced that be-
cause of the interrelationship in the
operation of all of the loss disallowance fac-
tors, new rules governing loss disallow-
ance on sales of subsidiary stock by
members of consolidated groups should be
implemented.
In Notice 2002–18, 2002–12 I.R.B. 644,
the IRS and Treasury Department stated that
regulations would be promulgated that
would defer or otherwise limit the utiliza-
tion of a loss on stock (or another asset that
reflects the basis of stock) in transactions
that facilitate the group’s utilization of a
single economic loss more than once. No-
tice 2002–18 further stated that such regu-
lations would apply to dispositions occurring
on or after March 7, 2002. These tempo-
rary regulations implement Notice 2002–18
and are necessary to provide taxpayers with
immediate guidance regarding stock ba-
sis and allowable loss in connection with
transfers of subsidiary member stock. Ac-
cordingly, good cause is found for dispens-
ing with a delayed effective date pursuant
to 5 U.S.C. 553(d)(3).
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It is hereby certified that
these regulations do not have a signifi-
cant impact on a substantial number of
small entities. This certification is based on
the fact that these regulations will prima-
rily affect affiliated groups of corpora-
tions, which tend to be larger businesses.
Moreover, the number of taxpayers af-
fected and the average burden are mini-
mal. Therefore, a Regulatory Flexibility
Analysis is not required. Pursuant to sec-
tion 7805(f) of the Internal Revenue Code,
these regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small businesses.
Drafting Information
The principle author of these regula-
tions is Aimee K. Meacham of the Office
of Chief Counsel (Corporate). However,
other personnel from the IRS and Trea-
sury Department participated in their de-
velopment.
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are
amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order to read in part as follows:
Authority: 26 U.S.C. 7805***
Section 1.1502–21T(b)(1) and (b)(3)(v)
also issued under 26 U.S.C. 1502.***
Section 1.1502–32T(a)(2), (b)(3)(iii)(C),
(b)(3)(iii)(D), and (b)(4)(vi) also issued un-
der 26 U.S.C. 1502.***
Section 1.1502–35T also issued under 26
U.S.C. 1502.***
Par. 2. In the list below, for each sec-
tion indicated in the left column, remove
the wording indicated in the middle col-
umn, and add the wording indicated in the
right column.
Affected SectionRemoveAdd
§1.267(f)–1(k)§§1.337(d)–1, 1.337(d)–2,
1.1502–13(f)(6), and1.1502–20
§§1.337(d)–2T, 1.1502–13(f)(6),
and 1.1502–35T
2003–13 I.R.B.648March 31, 2003

Affected SectionRemoveAdd
§1.597–3(e)Loss disallowance.For purposes of
§1.1502–20, FFA and the amount described
in§1.597–4(g)(3) are treated as an extraor-
dinary gain disposition within the mean-
ing of§1.1502–20(c)(2)(i) and a Taxable
Transfer is treated as an applicable asset ac-
quisition under section 1060(c) within the
meaning of§1.1502–20(c)(2)(i)(A)(4).
[Reserved].
§1.597–4(g)(2)(v), second sentence(See§§1.337(d)–1 and 1.1502–20 for po-
tential limitations on the group’s worth-
less stock deduction.)
(See§§1.337(d)–2T and 1.1502–35T(f) for
rules applicable when a member of a con-
solidated group is entitled to a worthless
stock deduction with respect to stock of an-
other member of the group.)
§1.1502–11(b)(3)(ii)
Example (c), third sentence.
See also§1.1502–20 for rules applicable to
losses from the sale of stock of subsidiar-
ies.
See also§§1.337(d)–2T and 1.1502–35T for
rules relating to basis adjustments and al-
lowance of stock loss on dispositions of
stock of a subsidiary member.
§1.1502–12(r)Forrulings relating to loss disallowance or
basis reduction on the disposition or de-
consolidation of stock of a subsidiary, see
§§1.337(d)–1, 1.337(d)–2 and 1.1502–20.
See§§1.337(d)–2T and 1.1502–35T(f) for
rules relating to basis adjustments and al-
lowance of stock loss on dispositions of
stock of a subsidiary member.
§1.1502–13(f)(7), Example 1(e), sixth sen-
tence
See also§1.1502–20(b) (additional stock ba-
sis reductions applicable to certain decon-
solidations).
§1.1502–15(b)(2)(iii), first sentence(e.g., under§1.1502–20 or section 267)(e.g., under§§1.337(d)–2T, 1.1502–35T, or
section 267)
§1.1502–21(b)(2)(i), third sentenceForrules permitting the reattribution of
losses of a subsidiary to the common par-
ent when loss is disallowed on the dispo-
sition of subsidiary stock, see§1.1502–
20(g).
§1.1502–32(b)(3)(iii)(B), third sentence§1.1502–20(b), or§1.1502–20(g)§1.1502–35T(b) or (f)(2)
§1.1502–32(b)(5)(ii), Example 2(b), last
sentence
See also§1.1502–20(b) (possible stock ba-
sis reduction on the deconsolidation of S).
§1.1502–32(e)(2), Example 4(a), fourth sen-
tence
(Section§1.1502–20(b) does not reduce P’s
basis in the S stock as a result of S’s de-
consolidation.)
§1.1502–80(c), last sentenceSee§1.1502–11(c) and 1.1502–20 for ad-
ditional rules relating to stock loss.
See§1.1502–11(c) and 1.1502–35T for ad-
ditional rules relating to stock loss.
§1.1502–91(h)(2), first sentence(unless disallowed under§1.1502–20 or oth-
erwise)
(unless disallowed under§1.337(d)–2T,
1.1502–35T, or otherwise)
Par. 3. Section 1.1502–21 is amended by:
1. Revising paragraph (b)(1).
2. Adding paragraphs (b)(3)(v) and
(h)(7).
The revisions and addition read as
follows:
§1.1502–21 Net operating losses.
*****
(b)***
(1) [Reserved]. For further guidance, see
§1.1502–21T(b)(1).
*****
(3)***
(v) [Reserved]. For further guidance, see
§1.1502–21T(b)(3)(v).
*****
(h)***
(7) [Reserved]. For further guidance, see
§1.1502–21T(h)(7).
Par. 4. Section 1.1502–21T is revised to
read as follows:
§1.1502–21T Net operating losses (tem-
porary).
(a) [Reserved]. For further guidance, see
§1.1502–21(a).
(b) [Reserved]. For further guidance, see
§1.1502–21(b).
March 31, 20036492003–13 I.R.B.

(1)Carryovers and carrybacks gener-
ally.The net operating loss carryovers and
carrybacks to a taxable year are determined
under the principles of section 172 and this
section. Thus, losses permitted to be ab-
sorbed in a consolidated return year gen-
erally are absorbed in the order of the
taxable years in which they arose, and losses
carried from taxable years ending on the
same date, and which are available to off-
set consolidated taxable income for the year,
generally are absorbed on apro rataba-
sis. Additional rules under the Internal Rev-
enue Code or regulations also apply. See,
e.g., section 382(l)(2)(B) (if losses are car-
ried from the same taxable year, losses sub-
ject to limitation under section 382 are
absorbed before losses that are not sub-
ject to limitation under section 382). See
Example 2of paragraph (c)(1)(iii) of this
section for an illustration ofpro rataab-
sorption of losses subject to a SRLY limi-
tation. See paragraph (b)(3)(v) of this
section regarding the treatment of any loss
that is treated as expired under§1.1502–
35T(f)(1).
(b)(2) through (b)(3)(iv) [Reserved]. For
further guidance, see§1.1502–21(b)(2)
through (b)(3)(iv).
(b)(3)(v)Losses treated as expired un-
der§1.1502–35T(f)(1).No loss treated as
expired by§1.1502–35T(f)(1) may be car-
ried over to any consolidated return year of
the group.
(c) through (h)(6) [Reserved]. For fur-
ther guidance, see§1.1502–21(c) through
(h)(6).
(h)(7)Losses treated as expired under
§1.1502–35T(f)(1).Paragraph (b)(3)(v) of
this section is effective for losses treated as
expired under§1.1502–35T(f)(1) on and af-
ter March 7, 2002, and no later than March
11, 2006.
Par. 5. Section 1.1502–32 is amended by:
1. Revising paragraph (a)(2).
2. Adding paragraphs (b)(3)(iii)(C),
(b)(3)(iii)(D), (b)(4)(vi), and (h)(6).
The revision and additions read as
follows:
§1.1502–32 Investment adjustments.
*****
(a)(2) [Reserved]. For further guidance,
see§1.1502–32T(a)(2).
(b)(3)(iii)(C) and (D) [Reserved]. For
furtherguidance,see§1.1502–
32T(b)(3)(iii)(C) and (D).
*****
(b)(4)(vi) [Reserved]. For further guid-
ance, see§1.1502–32T(b)(4)(vi).
*****
(h)(6) [Reserved]. For further guidance,
see§1.1502–32T(h)(6).
Par. 6. Section 1.1502–32T is revised to
read as follows:
§1.1502–32T Investment adjustments
(temporary).
(a) and (a)(1) [Reserved]. For further
guidance, see§1.1502–32(a) and (a)(1).
(a)(2)Application of other rules of law.
The rules of this section are in addition to
other rules of law. See,e.g., section 358 (ba-
sis determinations for distributees), sec-
tion 1016 (adjustments to basis),§1.1502–
11(b) (limitations on the use of losses),
§1.1502–19 (treatment of excess loss ac-
counts),§1.1502–31 (basis after a group
structure change), and§1.1502–35T (ad-
ditional rules relating to stock loss, includ-
ing losses attributable to worthlessness and
certain dispositions not followed by a sepa-
rate return year). P’s basis in S’s stock must
not be adjusted under this section and other
rules of law in a manner that has the ef-
fect of duplicating an adjustment. For ex-
ample, if pursuant to§1.1502–35T(c)(3) and
paragraph (b)(3)(iii)(C) of this section the
basis in stock is reduced to take into ac-
count a loss suspended under§1.1502–
35T(c)(1), such basis shall not be further
reduced to take into account such loss, or
a portion of such loss, if any, that is later
allowed pursuant to§1.1502–35T(c)(5). See
also paragraph (h)(5) of this section for ba-
sis reductions applicable to certain former
subsidiaries.
(b) through (b)(3)(iii)(B) [Reserved]. For
further guidance, see§1.1502–32(b) through
(b)(3)(iii)(B).
(b)(3)(iii)(C)Loss suspended under
§1.1502–35T(c).Any loss suspended pur-
suant to§1.1502–35T(c) is treated as a non-
capital, nondeductible expense incurred
during the taxable year that includes the date
of the disposition to which such section ap-
plies. See§1.1502–35T(c)(3). Consequently,
the basis of a higher-tier member’s stock
of P is reduced by the suspended loss in the
year it is suspended.
(D)Loss disallowed under§1.1502–
35T(g)(3)(iii).Any loss or deduction the use
ofwhichisdisallowedpursuant
to§1.1502–35T(g)(3)(iii) (other than a loss
or deduction described in§1.1502–
35T(g)(3)(i)(B)(11)), and with respect to
which no waiver described in paragraph
(b)(4) of this section is filed, is treated as
a noncapital, nondeductible expense in-
curred during the taxable year that such loss
would otherwise be absorbed. See§1.1502–
35T(g)(3)(iv).
(b)(4) through (b)(4)(v) [Reserved]. For
further guidance, see§1.1502–32(b)(4)
through (b)(4)(v).
(b)(4)(vi)Special rules in the case of cer-
tain transactions subject to§1.1502–35T.
If a member of a consolidated group trans-
fers stock of a subsidiary member and such
stock has a basis that exceeds its value im-
mediately before such transfer or a subsid-
iary member is deconsolidated and any
stock of such subsidiary member owned by
members of the group immediately be-
fore such deconsolidation has a basis that
exceeds its value, all members of the group
are subject to the provisions of§1.1502–
35T(b), which generally require a redeter-
mination of members’basis in all shares of
subsidiary stock. In addition, if stock of a
subsidiary member is treated as worthless
under section 165 (taking into account the
provisions of§1.1502–80(c)), or if a mem-
ber of a group disposes of subsidiary mem-
ber stock and on the following day the
subsidiary is not a member of the group and
does not have a separate return year, and
the common parent makes an election un-
der§1.1502–35T(f)(2) to reattribute to it-
self the losses treated as attributable to such
subsidiary member,§1.1502–35T(f)(2) re-
quires a reduction of members’basis in
shares of subsidiary stock.
(c) through (h)(5)(ii) [Reserved]. For fur-
ther guidance, see§1.1502–32(c) through
(h)(5)(ii).
(h)(6)Loss suspended under§1.1502–
35T(c) or disallowed under§1.1502–
35T(g)(3)(iii).Paragraphs(a)(2),
(b)(3)(iii)(C), (b)(3)(iii)(D), and (b)(4)(vi)
of this section are effective on and after
March 7, 2002, and expire on March 11,
2006.
Par. 7. Section 1.1502–35T is added to
read as follows:
§1.1502–35T Transfers of subsidiary
member stock and deconsolidations of
subsidiary members (temporary).
(a)Purpose.The purpose of this sec-
tion is to prevent a group from obtaining
more than one tax benefit from a single eco-
nomic loss. The provisions of this section
shall be construed in a manner consistent
2003–13 I.R.B.650March 31, 2003

with that purpose and in a manner that rea-
sonably carries out that purpose.
(b)Redetermination of basis on cer-
tain nondeconsolidating transfers of sub-
sidiary member stock and on certain
deconsolidations of subsidiary members—
(1)Redetermination of basis on certain non-
deconsolidating transfers of subsidiary
member stock.Except as provided in para-
graph (b)(3)(i) of this section, if, immedi-
ately after a transfer of stock of a subsidiary
member that has a basis that exceeds its
value, the subsidiary member remains a
member of the group, then the basis in each
share of subsidiary member stock owned by
each member of the group shall be rede-
termined in accordance with the provi-
sions of this paragraph (b)(1) immediately
before such transfer. All of the members’
bases in the shares of subsidiary member
stock immediately before such transfer shall
be aggregated. Such aggregated basis shall
be allocated first to the shares of the sub-
sidiary member’s preferred stock that are
owned by the members of the group im-
mediately before such transfer, in propor-
tion to, but not in excess of, the value of
those shares at such time. After alloca-
tion of the aggregated basis to all shares of
the preferred stock of the subsidiary mem-
ber pursuant to the preceding sentence, any
remaining basis shall be allocated among
all common shares of subsidiary member
stock held by members of the group im-
mediately before the transfer, in propor-
tion to the value of such shares at such time.
(2)Redetermination of basis on cer-
tain deconsolidations of subsidiary
members.—(i)Allocation of reallocable ba-
sis amount.Except as provided in para-
graph (b)(3)(ii) of this section, if,
immediately before a deconsolidation of a
subsidiary member, any share of stock of
such subsidiary owned by a member of the
group has a basis that exceeds its value,
then the basis in each share of the subsid-
iary member’s stock owned by each mem-
ber of the group shall be redetermined in
accordance with the provisions of this para-
graph (b)(2) immediately before such de-
consolidation. The basis in each share of the
subsidiary member’s stock held by mem-
bers of the group immediately before the
deconsolidation that has a basis in excess
of value at such time shall be reduced, but
not below such share’s value, in a man-
ner that, to the greatest extent possible,
causes the ratio of the basis to the value of
each such share to be the same; provided,
however, that the aggregate amount of such
reduction shall not exceed the reallocable
basis amount (as computed pursuant to
paragraph (b)(2)(ii) of this section). Then,
to the extent of the reallocable basis amount,
the basis of each share of the preferred stock
of the subsidiary member that are held by
members of the group immediately be-
fore the deconsolidation shall be increased,
but not above such share’s value, in a man-
ner that, to the greatest extent possible,
causes the ratio of the basis to the value of
each such share to be the same. Then, to
the extent that the reallocable basis amount
does not increase the basis of shares of pre-
ferred stock of the subsidiary member pur-
suant to the third sentence of this paragraph
(b)(2)(i), such amount shall increase the ba-
sis of all common shares of the subsid-
iary member’s stock held by members of
the group immediately before the decon-
solidation in a manner that, to the great-
est extent possible, causes the ratio of the
basis to the value of each such share to be
the same.
(ii)Calculation of reallocable basis
amount.The reallocable basis amount shall
equal the lesser of—
(A) The aggregate of all amounts by
which, immediately before the deconsoli-
dation, the basis exceeds the value of a
share of subsidiary member stock owned by
any member of the group at such time; and
(B) The total of the subsidiary mem-
ber’s (and any predecessor’s) items of de-
duction and loss, and the subsidiary
member’s (and any predecessor’s) allo-
cable share of items of deduction and loss
of all lower-tier subsidiary members, that
were taken into account in computing the
adjustment under§1.1502–32 to the bases
of shares of stock of the subsidiary mem-
ber (and any predecessor) held by mem-
bers of the group immediately before the
deconsolidation, other than shares that have
bases in excess of value immediately be-
fore the deconsolidation.
(3)Exceptions to application of rede-
termination rules.(i) Paragraph (b)(1) of this
section shall not apply to a transfer of sub-
sidiary member stock if—
(A) during the taxable year of such trans-
fer, in one or more fully taxable transac-
tions, the members of the group dispose of
all of the shares of the subsidiary mem-
ber stock that they own immediately be-
fore the transfer, other than the shares the
transfer of which would otherwise trigger
the application of paragraph (b)(1) of this
section, to a person or persons that are not
members of the group;
(B) during the taxable year of such trans-
fer, the members of the group are allowed
a worthless stock loss under section 165(g)
(taking into account the provisions of
§1.1502–80(c)) with respect to all of the
shares of subsidiary member stock that they
own immediately before the transfer, other
than the shares the transfer of which would
otherwise trigger the application of para-
graph (b)(1) of this section; or
(C) such transfer is to a member of the
group and section 332 (provided the stock
is transferred to an 80-percent distribu-
tee), section 351, or section 361 applies to
such transfer.
(ii) Paragraph (b)(2) of this section shall
not apply to a deconsolidation of a sub-
sidiary member if—
(A) during the taxable year of such de-
consolidation, in one or more fully tax-
able transactions, the members of the group
dispose of all of the shares of the subsid-
iary member stock that they own immedi-
ately before the deconsolidation to a person
or persons that are not members of the
group;
(B) such deconsolidation results from a
fully taxable disposition, to a person or per-
sons that are not members of the group, of
some of the shares of the subsidiary mem-
ber, and, during the taxable year of such de-
consolidation, the members of the group are
allowed a worthless stock loss under sec-
tion 165(g) with respect to all of the shares
of subsidiary member stock that they own
immediately after the deconsolidation; or
(C) the deconsolidation of the subsid-
iary member results from the deconsolida-
tion of a higher-tier subsidiary member and,
immediately after the deconsolidation of the
subsidiary member, none of the stock of the
subsidiary member is owned by a group
member.
(4)Special rule for lower-tier subsid-
iaries.If, immediately after a transfer of
subsidiary member stock or a deconsoli-
dation of a subsidiary member, a lower-
tier subsidiary member some of the stock
of which is owned by the subsidiary mem-
ber is a member of the group, then, for pur-
poses of applying paragraph (b) of this
section, the subsidiary member shall be
treated as having transferred its stock of the
lower-tier subsidiary member. This prin-
March 31, 20036512003–13 I.R.B.

ciple shall apply to stock of subsidiary
members that are owned by such lower-
tier subsidiary member.
(5)Stock basis adjustments for higher-
tier stock.The basis adjustments required
under this paragraph (b) result in basis ad-
justments to higher-tier member stock. The
adjustments are applied in the order of the
tiers, from the lowest to highest. For ex-
ample, if a common parent owns stock of
a subsidiary member that owns stock of a
lower-tier subsidiary member and the sub-
sidiary member recognizes a loss on the dis-
position of a portion of its shares of the
lower-tier subsidiary member stock, the
common parent must adjust its basis in its
subsidiary member stock under the prin-
ciples of§1.1502–32 to reflect the adjust-
ments that the subsidiary member must
make to its basis in its stock of the lower-
tier subsidiary member.
(6)Ordering rules.(i) The rules of this
paragraph (b) apply after the rules of
§1.1502–32 are applied.
(ii) The rules of this paragraph (b) ap-
ply before the rules of§1.337(d)–2T and
paragraph (c) of this section are applied.
(iii) Paragraph (b) of this section (and
any resulting basis adjustments to higher-
tier member stock made pursuant to para-
graph (b)(5) of this section) applies to
redetermine the basis of stock of a lower-
tier subsidiary member before paragraph (b)
of this section applies to a higher-tier mem-
ber of such lower-tier subsidiary member.
(c)Loss suspension—(1)General rule.
Any loss recognized by a member of a con-
solidated group with respect to the dispo-
sition of a share of subsidiary member stock
shall be suspended to the extent of the du-
plicated loss with respect to such share of
stock if, immediately after the disposi-
tion, the subsidiary is a member of the con-
solidated group of which it was a member
immediately prior to the disposition (or any
successor group).
(2)Special rule for lower-tier subsid-
iaries.This paragraph (c)(2) applies if nei-
ther paragraph (c)(1) nor (f) of this section
applies to a member’s disposition of a share
of stock of a subsidiary member (the de-
parting member), a loss is recognized on the
disposition of such share, and the depart-
ing member owns stock of one or more
other subsidiary members (a remaining
member) that is a member of such group
immediately after the disposition. In that
case, such loss shall be suspended to the ex-
tent the duplicated loss with respect to the
departing member stock disposed of is at-
tributable to the remaining member or mem-
bers.
(3)Treatment of suspended loss.For pur-
poses of the rules of§1.1502–32, any loss
suspended pursuant to paragraph (c)(1) or
(c)(2) of this section is treated as a non-
capital, nondeductible expense of the mem-
ber that disposes of subsidiary member
stock, incurred during the taxable year that
includes the date of the disposition of stock
to which paragraph (c)(1) or (c)(2) of
this section applies. See§1.1502–
32T(b)(3)(iii)(C). Consequently, the basis
of a higher-tier member’s stock of the mem-
ber that disposes of subsidiary member
stock is reduced by the suspended loss in
the year it is suspended.
(4)Reduction of suspended loss—(i)
General rule.The amount of any loss sus-
pended pursuant to paragraphs (c)(1) and
(c)(2) of this section shall be reduced, but
not below zero, by the subsidiary mem-
ber’s (and any successor’s) items of de-
duction and loss, and the subsidiary
member’s (and any successor’s) allocable
share of items of deduction and loss of all
lower-tier subsidiary members, that are al-
locable to the period beginning on the date
of the disposition that gave rise to the sus-
pended loss and ending on the day before
the first date on which the subsidiary mem-
ber (or any successor) is not a member of
the group of which it was a member im-
mediately prior to the disposition (or any
successor group), and that are taken into ac-
count in determining consolidated tax-
able income (or loss) of such group for any
taxable year that includes any date on or af-
ter the date of the disposition and before the
first date on which the subsidiary mem-
ber (or any successor) is not a member of
such group; provided, however, that such
reduction shall not exceed the excess of the
amount of such items over the amount of
such items that are taken into account in de-
termining the basis adjustments made un-
der§1.1502–32 to stock of the subsidiary
member (or any successor) owned by mem-
bers of the group. The preceding sentence
shall not apply to items of deduction and
loss to the extent that the group can estab-
lish that all or a portion of such items was
not reflected in the computation of the du-
plicated loss with respect to the subsid-
iary member on the date of the disposition
of stock that gave rise to the suspended loss.
(ii)Operating rules—(A)Year in which
deduction or loss is taken into account.For
purposes of paragraph (c)(4)(i) of this sec-
tion, a subsidiary member’s (or any suc-
cessor’s) deductions and losses are treated
as taken into account when and to the ex-
tent they are absorbed by the subsidiary
member (or any successor) or any other
member. To the extent that the subsidiary
member’s (or any successor’s) deduction or
loss is absorbed in the year it arises or is
carried forward and absorbed in a subse-
quent year (e.g., under section 172, 465, or
1212), the deduction is treated as taken into
account in the year in which it is absorbed.
To the extent that a subsidiary member’s (or
any successor’s) deduction or loss is car-
ried back and absorbed in a prior year
(whether consolidated or separate), the de-
duction or loss is treated as taken into ac-
count in the year in which it arises and not
in the year in which it is absorbed.
(B)Determination of items that are al-
locable to the post-disposition, pre-
deconsolidation period.For purposes of
paragraph (c)(4)(i) of this section, the de-
termination of whether a subsidiary mem-
ber’s (or any successor’s) items of deduction
and loss and allocable share of items of de-
duction and loss of all lower-tier subsid-
iary members are allocable to the period
beginning on the date of the disposition of
subsidiary stock that gave rise to the sus-
pended loss and ending on the day before
the first date on which the subsidiary mem-
ber (or any successor) is not a member of
the consolidated group of which it was a
member immediately prior to the disposi-
tion (or any successor group) is determined
pursuant to the rules of§1.1502–76(b)(2),
without regard to§1.1502–76(b)(2)(ii)(D),
as if the subsidiary member ceased to be
a member of the group at the end of the day
before the disposition and filed separate re-
turns for the period beginning on the date
of the disposition and ending on the day be-
fore the first date on which it is not a mem-
ber of such group.
(5)Allowable loss—(i)General rule.To
the extent not reduced under paragraph
(c)(4) of this section, any loss suspended
pursuant to paragraph (c)(1) or (c)(2) of this
section shall be allowed, to the extent oth-
erwise allowable under applicable provi-
sions of the Internal Revenue Code and
regulations thereunder, on a return filed by
the group of which the subsidiary was a
member on the date of the disposition of
2003–13 I.R.B.652March 31, 2003

subsidiary stock that gave rise to the sus-
pended loss (or any successor group) for the
taxable year that includes the day before the
first date on which the subsidiary (or any
successor) is not a member of such group
or the date the group is allowed a worth-
less stock loss under section 165(g) (tak-
ing into account the provisions of§1.1502–
80(c)) with respect to all of the subsidiary
member stock owned by members.
(ii)No tiering up of certain adjustments.
No adjustments shall be made to a mem-
ber’s basis of stock of a subsidiary mem-
ber (or any successor) for a suspended loss
that is taken into account under paragraph
(c)(5)(i) of this section. See§1.1502–
32T(a)(2).
(iii)Statement of allowed loss.Para-
graph (c)(5)(i) of this section applies only
if the separate statement required under this
paragraph (c)(5)(iii) is filed with, or as part
of, the taxpayer’s return for the year in
which the loss is allowable. The state-
ment must be entitled“ALLOWED LOSS
UNDER§1.1502–35T(c)(5)”and must con-
tain the name and employer identification
number of the subsidiary the stock of which
gave rise to the loss.
(6)Special rule for dispositions of cer-
tain carryover basis assets.If—
(i) A member of a group recognizes a
loss on the disposition of an asset other than
stock of a subsidiary member;
(ii) Such member’s basis in the asset dis-
posed of was determined, directly or indi-
rectly, in whole or in part, by reference to
the basis of stock of a subsidiary member
and, at the time of the determination of the
member’s basis in the asset disposed of,
there was a duplicated loss with respect to
such stock of the subsidiary member; and
(iii) Immediately after the disposition, the
subsidiary member is a member of such
group, then such loss shall be suspended
pursuant to the principles of paragraphs
(c)(1) and (c)(2) of this section to the ex-
tent of the duplicated loss with respect to
such stock at the time of the determina-
tion of basis of the asset disposed of. Prin-
ciples similar to those set forth in
paragraphs (c)(3), (c)(4), and (c)(5) of this
section shall apply to a loss suspended pur-
suant to this paragraph (c)(6).
(7)Coordination with loss deferral, loss
disallowance, and other rules—(i)In gen-
eral.Loss recognized on the disposition of
subsidiary member stock or another asset
is subject to redetermination, deferral, or
disallowance under other applicable pro-
visions of the Internal Revenue Code and
regulations thereunder, including sections
267(f) and 482. Paragraphs (c)(1), (c)(2),
and (c)(6) of this section do not apply to
a loss that is disallowed under any other
provision. If loss is deferred under any other
provision, paragraphs (c)(1), (c)(2), and
(c)(6) of this section apply when the loss
would otherwise be taken into account un-
der such other provision. However, if an
overriding event described in paragraph
(c)(7)(ii) of this section occurs before the
deferred loss is taken into account, para-
graphs (c)(1), (c)(2), and (c)(6) of this sec-
tion apply to the loss immediately before
the event occurs, even though the loss may
not be taken into account until a later time.
(ii)Overriding events.For purposes of
paragraph (c)(7)(i) of this section, the fol-
lowing are overriding events—
(A) The stock ceases to be owned by a
member of the consolidated group;
(B) The stock is canceled or redeemed
(regardless of whether it is retired or held
as treasury stock); or
(C) The stock is treated as disposed of
under§1.1502–19(c)(1)(ii)(B) or (c)(1)(iii).
(8)Application.This paragraph (c) shall
not be applied in a manner that perma-
nently disallows a deduction for an eco-
nomic loss, provided that such deduction
is otherwise allowable. If the application of
any provision of this paragraph (c) re-
sults in such a disallowance, proper ad-
justment may be made to prevent such a
disallowance. Whether a provision of this
paragraph (c) has resulted in such a disal-
lowance is determined on the date on which
the subsidiary (or any successor) the dis-
position of the stock of which gave rise to
a suspended stock loss is not a member of
the group or the date the group is allowed
a worthless stock loss under section 165(g)
(taking into account the provisions of
§1.1502–80(c)) with respect to all of such
subsidiary member stock owned by mem-
bers. Proper adjustment in such cases shall
be made by restoring the suspended stock
loss immediately before the subsidiary
ceases to be a member of the group or the
group is allowed a worthless stock loss un-
der section 165(g) (taking into account the
provisions of§1.1502–80(c)) with respect
to all of such subsidiary member stock
owned by members, to the extent that its
reduction pursuant to paragraph (c)(4) of
this section had the result of permanently
disallowing a deduction for an economic
loss.
(9)Ordering rule.The rules of this para-
graph (c) apply after the rules of para-
graph (b) of this section and§1.337(d)–2T
are applied.
(d)Definitions—(1)Disposition. Dis-
positionmeans any event in which gain or
loss is recognized, in whole or in part.
(2)Deconsolidation. Deconsolidation
means any event that causes a subsidiary
member to no longer be a member of the
consolidated group.
(3)Value. Valuemeans fair market value.
(4)Duplicated loss—(i)In general.Du-
plicated loss is determined immediately af-
ter a disposition and equals the excess, if
any, of—
(A) The sum of—
(1) The aggregate adjusted basis of the
subsidiary member’s assets other than any
stock that subsidiary member owns in an-
other subsidiary member; and
(2) Any losses attributable to the sub-
sidiary member and carried to the subsid-
iary member’s first taxable year following
the disposition; and
(3) Any deductions of the subsidiary
member that have been recognized but are
deferred under a provision of the Internal
Revenue Code (such as deductions de-
ferred under section 469); over
(B) The sum of—
(1) The value of the subsidiary mem-
ber’s stock; and
(2) Any liabilities of the subsidiary mem-
ber that have been taken account for tax
purposes.
(ii)Special rules.(A) The amounts de-
termined under paragraph (d)(4)(i) (other
than amounts described in paragraph
(d)(4)(i)(B)(1)) of this section with re-
spect to a subsidiary member include its al-
locable share of corresponding amounts with
respect to all lower-tier subsidiary mem-
bers. If 80 percent or more in value of the
stock of a subsidiary member is acquired
by purchase in a single transaction (or in
a series of related transactions during any
12-month period), the value of the subsid-
iary member’s stock may not exceed the
purchase price of the stock divided by the
percentage of the stock (by value) so pur-
chased. For this purpose, stock is acquired
by purchase if the transferee is not re-
lated to the transferor within the meaning
of sections 267(b) and 707(b)(1), using the
March 31, 20036532003–13 I.R.B.

language“‘10 percent’”instead of“‘50 per-
cent’”each place that it appears, and the
transferee’s basis in the stock is deter-
mined wholly by reference to the consid-
eration paid for such stock.
(B) The amounts determined under para-
graph (d)(4)(i) of this section are not ap-
plied more than once to suspend a loss
under this section.
(5)Predecessor and Successor.A pre-
decessor is a transferor of assets to a trans-
feree (the successor) in a transaction—
(i) To which section 381(a) applies;
(ii) In which substantially all of the as-
sets of the transferor are transferred to mem-
bers in a complete liquidation;
(iii) In which the successor’s basis in as-
sets is determined (directly or indirectly, in
whole or in part) by reference to the trans-
feror’s basis in such assets, but the trans-
feree is a successor only with respect to the
assets the basis of which is so determined;
or
(iv) Which is an intercompany transac-
tion, but only with respect to assets that are
being accounted for by the transferor in a
prior intercompany transaction.
(6)Successor group.A surviving group
is treated as a successor group of a con-
solidated group (the terminating group) that
ceases to exist as a result of—
(i) The acquisition by a member of an-
other consolidated group of either the as-
sets of the common parent of the
terminating group in a reorganization de-
scribed in section 381(a)(2), or the stock of
the common parent of the terminating
group; or
(ii) The application of the principles of
§1.1502–75(d)(2) or (3).
(7)Preferred stock, common stock. Pre-
ferred stockandcommon stockshall have
the meanings set forth in§1.1502–32(d)(2)
and (3), respectively.
(8)Higher-tier.A subsidiary member is
higher-tierwith respect to a member if or
to the extent investment basis adjustments
under§1.1502–32 with respect to the stock
of the latter member would affect invest-
ment basis adjustments with respect to the
stock of the former member.
(9)Lower-tier.A subsidiary member is
lower-tierwith respect to a member if or
to the extent investment basis adjustments
under§1.1502–32 with respect to the stock
of the former member would affect invest-
ment basis adjustments with respect to the
stock of the latter member.
(e)Examples.For purposes of the ex-
amples in this section, all groups file con-
solidated returns on a calendar-year basis,
the facts set forth the only corporate ac-
tivity, all transactions are between unre-
lated persons unless otherwise specified, and
tax liabilities are disregarded. The prin-
ciples of paragraphs (a) through (d) of this
section are illustrated by the following
examples:
Example 1. Nondeconsolidating sale of preferred
stock of lower-tier subsidiary member.(i)Facts.P owns
100 percent of the common stock of each of S1 and
S2. S1 and S2 each have only one class of stock out-
standing. P’s basis in the stock of S1 is $100 and the
value of such stock is $130. P’s basis in the stock of
S2 is $120 and the value of such stock is $90. P, S1,
and S2 are all members of the P group. S1 and S2
form S3. In Year 1, in transfers to which section 351
applies, S1 contributes $100 to S3 in exchange for all
of the common stock of S3 and S2 contributes an as-
set with a basis of $50 and a value of $20 to S3 in
exchange for all of the preferred stock of S3. S3 be-
comes a member of the P group. In Year 3, in a trans-
action that is not part of the plan that includes the
contributions to S3, S2 sells the preferred stock of S3
for $20. Immediately after the sale, S3 is a member
of the P group.
(ii)Application of basis redetermination rule.Be-
cause S2’s basis in the preferred stock of S3 ex-
ceeds its value immediately prior to the sale and S3
is a member of the P group immediately after the sale,
all of the P group members’bases in the stock of S3
is redetermined pursuant to paragraph (b)(1) of this
section. Of the group members’total basis of $150
in the S3 stock, $20 is allocated to the preferred stock,
the fair market value of the preferred stock on the date
of the sale, and $130 is allocated to the common stock.
S2’s sale of the preferred stock results in the recog-
nition of $0 of gain/loss. Pursuant to paragraph (b)(5)
of this section, the redetermination of S1’s and S2’s
bases in the stock of S3 results in adjustments to P’s
basis in the stock of S1 and S2. In particular, P’s ba-
sis in the stock of S1 is increased by $30 to $130 and
its basis in the stock of S2 is decreased by $30 to $90.
Example 2. Deconsolidating sale of common stock.
(i)Facts.In Year 1, in a transfer to which section 351
applies, P contributes Asset A with a basis of $900 and
a value of $200 to S in exchange for one share of S
common stock (CS1). In Years 2 and 3, in succes-
sive but unrelated transfers to which section 351 ap-
plies, P transfers $200 to S in exchange for one share
of S common stock (CS2), Asset B with a basis of
$300 and a value of $200 in exchange for one share
of S common stock (CS3), and Asset C with a basis
of $1000 and a value of $200 in exchange for one
share of S common stock (CS4). In Year 4, S sells As-
set A for $200, recognizing $700 of loss that is used
to offset income of P recognized during Year 4. As
a result of the sale of Asset A, the basis of each of
P’s four shares of S common stock is reduced by $175.
Therefore, the basis of CS1 is $725. The basis of CS2
is $25. The basis of CS3 is $125, and the basis of CS4
is $825. In Year 5 in a transaction that is not part of
a plan that includes the Year 1 contribution, P sells
CS4 for $200. Immediately after the sale of CS4, S
is not a member of the P group.
(ii)Application of basis redetermination rule.Be-
cause P’s basis in each of CS1 and CS4 exceeds its
value immediately prior to the deconsolidation of S,
P’s basis in its shares of S common stock is redeter-
mined pursuant to paragraph (b)(2) of this section. Pur-
suant to paragraph (b)(2)(ii) of this section, the
reallocable basis amount is $350 (the lesser of $1150,
the gross loss inherent in the stock of S owned by P
immediately before the sale, and $350, the aggre-
gate amount of S’s items of deduction and loss that
were previously taken into account in the computa-
tion of the adjustment to the basis of the stock of S
that P did not hold at a loss immediately before the
deconsolidation). Pursuant to paragraph (b)(2)(i) of this
section, first, P’s basis in CS1 is reduced from $725
to $600 and P’s basis in CS4 is reduced from $825
to $600. Then, the reallocable basis amount increases
P’s basis in CS2 from $25 to $250 and P’s basis in
CS3 from $125 to $250. P recognizes $400 of loss on
the sale of CS4. The loss suspension rule does not ap-
ply because S is no longer a member of the P group.
Thus, the loss is allowable at that time.
Example 3. Nondeconsolidating sale of common
stock.(i)Facts.In Year 1, P forms S with a contri-
bution of $80 in exchange for 80 shares of the com-
mon stock of S, which at that time represents all of
the outstanding stock of S. S becomes a member of
the P group. In Year 2, P contributes Asset A with a
basis of $50 and a value of $20 in exchange for 20
shares of the common stock of S in a transfer to which
section 351 applies. In Year 3, in a transaction that is
not part of the plan that includes the Year 2 contri-
bution, P sells the 20 shares of the common stock of
S that it acquired in Year 2 for $20. Immediately af-
ter the Year 3 stock sale, S is a member of the P group.
At the time of the Year 3 stock sale, S has $80 and
Asset A. In Year 4, S sells Asset A , the basis and value
of which have not changed since its contribution to
S. On the sale of Asset A for $20, S recognizes a $30
loss. The P group cannot establish that all or a por-
tion of the $30 loss was not reflected in the calcula-
tion of the duplicated loss of S on the date of the Year
3 stock sale. The $30 loss is used on the P group re-
turn to offset income of P. In Year 5, P sells its re-
maining S common stock for $80.
(ii)Application of basis redetermination and loss
suspension rules.Because P’s basis in the common
stock sold exceeds its value immediately prior to the
sale and S is a member of the P group immediately
after the sale, P’s basis in all of the stock of S is re-
determined pursuant to paragraph (b)(1) of this sec-
tion. Of P’s total basis of $130 in the S common stock,
a proportionate amount is allocated to each of the 100
shares of S common stock. Accordingly, $26 is allo-
cated to the common stock of S that is sold and $104
is allocated to the common stock of S that is re-
tained. On P’s sale of the 20 shares of the common
stock of S for $20, P recognizes a loss of $6. Be-
cause the sale of the 20 shares of common stock of
S does not result in the deconsolidation of S, under
paragraph (c)(1) of this section, that loss is sus-
pended to the extent of the duplicated loss with re-
spect to the shares sold. The duplicated loss with
respect to the shares sold is $6. Therefore, the en-
tire $6 loss is suspended.
(iii)Effect of subsequent asset sale on stock ba-
sis.Of the $30 loss recognized on the sale of Asset
A, $24 is taken into account in determining the ba-
sis adjustments made under§1.1502–32 to the stock
2003–13 I.R.B.654March 31, 2003

of S owned by P. Accordingly, P’s basis in its S stock
is reduced by $24 from $104 to $80.
(iv)Effect of subsequent asset sale on suspended
loss.Because P cannot establish that all or a portion
of the loss recognized on the sale of Asset A was not
reflected in the calculation of the duplicated loss of
S on the date of the Year 3 stock sale and such loss
is allocable to the period beginning on the date of the
Year 3 disposition of the S stock and ending on the
day before the first date on which S is not a mem-
ber of the P group and is taken into account in de-
termining consolidated taxable income (or loss) of the
P group for a taxable year that includes a date on or
after the date of the Year 3 disposition and before the
first date on which S is not a member of the P group,
such asset loss reduces the suspended loss pursuant
to paragraph (c)(4) of this section. The amount of such
reduction, however, cannot exceed $6, the excess of
the amount of such loss, $30, over the amount of such
loss that is taken into account in determining the ba-
sis adjustment made to the stock of S owned by P, $24.
Therefore, the suspended loss is reduced to zero.
(v)Effect of subsequent stock sale.P recognizes
$0 gain/loss on the Year 5 sale of its remaining S com-
mon stock. No amount of suspended loss remains to
be allowed under paragraph (c)(5) of this section.
Example 4. Nondeconsolidating sale of common
stock of lower-tier subsidiary.(i)Facts.In Year 1, P
forms S1 with a contribution of $200 in exchange for
all of the common stock of S1, which represents all
of the outstanding stock of S1. In the same year, S1
forms S2 with a contribution of $80 in exchange for
80 shares of the common stock of S2, which at that
time represents all of the outstanding stock of S2. S1
and S2 become members of the P group. In the same
year, S2 purchases Asset A for $80. In Year 2, S1 con-
tributes Asset B with a basis of $50 and a value of
$20 in exchange for 20 shares of the common stock
of S2 in a transfer to which section 351 applies. In
Year 3, S1 sells the 20 shares of the common stock
of S2 that it acquired in Year 2 for $20. Immedi-
ately after the Year 3 stock sale, S2 is a member of
the P group. At the time of the Year 3 stock sale, the
bases and values of Asset A and Asset B are un-
changed. In Year 4, S2 sells Asset B for $45, recog-
nizing a $5 loss. The P group cannot establish that all
or a portion of the $5 loss was not reflected in the cal-
culation of the duplicated loss of S2 on the date of
the Year 3 stock sale. The $5 loss is used on the P
group return to offset income of P. In Year 5, S1 sells
its remaining S2 common stock for $100.
(ii)Application of basis redetermination and loss
suspension rules.Because S1’s basis in the S2 com-
mon stock sold exceeds its value immediately prior
to the sale and S2 is a member of the P group im-
mediately after the sale, S1’s basis in all of the stock
of S2 is redetermined pursuant to paragraph (b)(1) of
this section. Of S1’s total basis of $130 in the S2 com-
mon stock, a proportionate amount is allocated to each
of the 100 shares of S2 common stock. Accordingly,
a total of $26 is allocated to the common stock of S2
that is sold and $104 is allocated to the common stock
of S2 that is retained. On S1’s sale of the 20 shares
of the common stock of S2 for $20, S1 recognizes a
loss of $6. Because the sale of the 20 shares of com-
mon stock of S2 does not result in the deconsolida-
tion of S2, under paragraph (c)(1) of this section, that
loss is suspended to the extent of the duplicated loss
with respect to the shares sold. The duplicated loss
with respect to the shares sold is $6. Therefore, the
entire $6 loss is suspended. Pursuant to paragraph
(c)(3) of this section and§1.1502–32T(b)(3)(iii)(C),
the suspended loss is treated as a noncapital, nonde-
ductible expense incurred by S1 during the tax year
that includes the date of the disposition of stock to
which paragraph (c)(1) of this section applies. Ac-
cordingly, P’s basis in its S1 stock is reduced from
$200 to $194.
(iii)Effect of subsequent asset sale on stock ba-
sis.Of the $5 loss recognized on the sale of Asset B,
$4 is taken into account in determining the basis ad-
justments made under§1.1502–32 to the stock of S2
owned by S1. Accordingly, S1’s basis in its S2 stock
is reduced by $4 from $104 to $100 and P’s basis in
its S1 stock is reduced by $4 from $194 to $190.
(iv)Effect of subsequent asset sale on suspended
loss.Because P cannot establish that all or a portion
of the loss recognized on the sale of Asset B was not
reflected in the calculation of the duplicated loss of
S2 on the date of the Year 3 stock sale and such loss
is allocable to the period beginning on the date of the
Year 3 disposition of the S2 stock and ending on the
day before the first date on which S2 is not a mem-
ber of the P group and is taken into account in de-
termining consolidated taxable income (or loss) of the
P group for a taxable year that includes a date on or
after the date of the Year 3 disposition and before the
first date on which S2 is not a member of the P group,
such asset loss reduces the suspended loss pursuant
to paragraph (c)(4) of this section. The amount of such
reduction, however, cannot exceed $1, the excess of
the amount of such loss, $5, over the amount of such
loss that is taken into account in determining the ba-
sis adjustment made to the stock of S2 owned by
members of the P group, $4. Therefore, the sus-
pended loss is reduced to $5.
(v)Effect of subsequent stock sale.In Year 5, when
S1 sells its remaining S2 stock for $100, it recog-
nizes $0 gain/loss. Pursuant to paragraph (c)(5) of this
section, the remaining $5 of the suspended loss is al-
lowed on the P group’s return for Year 5 when S1 sells
its remaining S2 stock.
Example 5. Deconsolidating sale of subsidiary
member owning stock of another subsidiary mem-
ber that remains in group.(i)Facts.In Year 1, P forms
S1 with a contribution of Asset A with a basis of $50
and a value of $20 in exchange for 100 shares of com-
mon stock of S1 in a transfer to which section 351
applies. Also in Year 1, P and S1 form S2. P contrib-
utes $80 to S2 in exchange for 80 shares of com-
mon stock of S2. S1 contributes Asset A to S2 in
exchange for 20 shares of common stock of S2 in a
transfer to which section 351 applies. In Year 3, in a
transaction that is not part of a plan that includes the
Year 1 contributions, P sells its 100 shares of S1 com-
mon stock for $20. Immediately after the Year 3 stock
sale, S2 is a member of the P group. At the time of
the Year 3 stock sale, S1 owns 20 shares of com-
mon stock of S2, and S2 has $80 and Asset A. In Year
4, S2 sells Asset A, the basis and value of which have
not changed since its contribution to S2. On the sale
of Asset A for $20, S2 recognizes a $30 loss. That $30
loss is used on the P group return to offset income of
P. In Year 5, P sells its S2 common stock for $80.
(ii)Application of basis redetermination and loss
suspension rules.Pursuant to paragraph (b)(4) of this
section, because immediately before P’s transfer of S1
stock S1 owns stock of S2 (another subsidiary mem-
ber of the same group) that has a basis that exceeds
its value, paragraph (b) of this section applies as if S1
had transferred its stock of S2. Because S2 is a mem-
ber of the group immediately after the transfer of the
S1 stock, the group member’s basis in the S2 stock
is redetermined pursuant to paragraph (b)(1) of this
section immediately prior to the sale of the S1 stock.
Of the group members’total basis of $130 in the S2
stock, $26 is allocated to S1’s 20 shares of S2 com-
mon stock and $104 is allocated to P’s 80 shares of
S2 common stock. Pursuant to paragraph (b)(5) of this
section, the redetermination of S1’s basis in the stock
of S2 results in an adjustment to P’s basis in the stock
of S1. In particular, P’s basis in the stock of S1 is de-
creased by $24 to $26. On P’s sale of its 100 shares
of S1 common stock for $20, P recognizes a loss of
$6. Because S1 is not a member of the P group im-
mediately after P’s sale of the S1 stock, paragraph
(c)(1) of this section does not apply to suspend such
loss. However, because P recognizes a loss with re-
spect to the disposition of the S1 stock and S1 owns
stock of S2 (which is a member of the P group im-
mediately after the disposition), paragraph (c)(2) of
this section does apply to suspend up to $6 of that loss,
an amount equal to the amount by which the dupli-
cated loss with respect to the stock of S1 sold is at-
tributable to S2’s adjusted basis in its assets, loss
carryforwards, and deferred deductions.
(iii)Effect of subsequent asset sale on stock ba-
sis.Of the $30 loss recognized on the sale of Asset
A, $24 is taken into account in determining the ba-
sis adjustments made under§1.1502–32 to the stock
of S2 owned by P. Accordingly, P’s basis in its S2
stock is reduced by $24 from $104 to $80.
(iv)Effect of subsequent asset sale on suspended
loss.Because P cannot establish that all or a portion
of the loss recognized on the sale of Asset A was not
reflected in the calculation of the duplicated loss of
S2 on the date of the Year 3 stock sale and such loss
is allocable to the period beginning on the date of the
Year 3 deemed disposition of the S2 stock and end-
ing on the day before the first date on which S2 is not
a member of the P group and is taken into account
in determining consolidated taxable income (or loss)
of the P group for a taxable year that includes a date
on or after the date of the Year 3 deemed disposi-
tion and before the first date on which S2 is not a
member of the P group, such asset loss reduces the
suspended loss pursuant to paragraph (c)(4) of this sec-
tion. The amount of such reduction, however, can-
not exceed $6, the excess of the amount of such loss,
$30, over the amount of such loss that is taken into
account in determining the basis adjustment made to
the stock of S2 owned by P, $24. Therefore, the sus-
pended loss is reduced to zero.
(v)Effect of subsequent stock sale.P recognizes
$0 gain/loss on the Year 5 sale of its remaining S2
common stock. No amount of suspended loss re-
mains to be allowed under paragraph (c)(5) of this sec-
tion.
Example 6. Loss recognized on asset with basis
determined by reference to stock basis of subsidiary
member.(i)Facts.In Year 1, P forms S with a con-
tribution of $80 in exchange for 80 shares of com-
mon stock of S which at that time represents all of
the outstanding stock of S. S becomes a member of
the P group. In Year 2, P contributes Asset A with a
basis of $50 and a value of $20 in exchange for 20
shares of common stock of S in a transfer to which
section 351 applies. In Year 3, in a transaction that is
not part of a plan that includes the Year 1 and Year
2 contributions, P contributes the 20 shares of S com-
March 31, 20036552003–13 I.R.B.

mon stock it acquired in Year 2 to PS, a partner-
ship, in exchange for a 20 percent capital and profits
interest in a transaction described in section 721. Im-
mediately after the contribution to PS, S is a mem-
ber of the P group. In Year 4, P sells its interest in PS
for $20, recognizing a $30 loss.
(ii)Application of basis redetermination rule upon
nonrecognition transfer.Because P’s basis in the S
common stock contributed to PS exceeds its value im-
mediately prior to the transfer and S is a member of
the P group immediately after the transfer, P’s basis
in all of the S stock is redetermined pursuant to para-
graph (b)(1) of this section. Of P’s total basis of $130
in the common stock of S, a proportionate amount is
allocated to each share of S common stock. Accord-
ingly, $26 is allocated to the S common stock that is
contributed to PS and, under section 722, P’s basis in
its interest in PS is $26.
(iii)Application of loss suspension rule on dis-
position of asset with basis determined by reference
to stock basis of subsidiary member.P recognizes a
$6 loss on its disposition of its interest in PS. Be-
cause P’s basis in its interest in PS was determined
by reference to the basis of S stock and at the time
of the determination of P’s basis in its interest in PS
such S stock had a duplicated loss of $6, and, im-
mediately after the disposition, S is a member of the
P group, such loss is suspended to the extent of such
duplicated loss. Principles similar to those of para-
graphs (c)(3), (c)(4), and (c)(5) of this section shall
apply to such suspended loss.
(f)Worthlessness and certain disposi-
tions not followed by separate return
years—(1)General rule.Notwithstand-
ing any other provision in the regulations
under section 1502, if stock of a subsid-
iary member is treated as worthless under
section 165 (taking into account the pro-
visions of§1.1502–80(c)), or if a mem-
ber of a group disposes of subsidiary
member stock and on the following day the
subsidiary is not a member of the group and
does not have a separate return year, then
all losses treated as attributable to the sub-
sidiary member under the principles of
§1.1502–21(b)(2)(iv), after computing the
taxable income of the group, the subsid-
iary member, or a group of which the sub-
sidiary member was previously a member
for the taxable year that includes the de-
termination of worthlessness or the dispo-
sition and any prior taxable year, shall be
treated as expired, but not as absorbed by
the group, as of the beginning of the
group’s taxable year that follows the tax-
able year that includes the determination of
worthlessness or the disposition.
(2)Election in the case of determina-
tions of worthlessness and dispositions not
followed by a separate return that occurred
prior to March 14, 2003.If stock of a sub-
sidiary member is treated as worthless un-
der section 165 (taking into account the
provisions of§1.1502–80(c)) on or after
March 7, 2002, and prior to March 14,
2003, or if a member of a group disposes
of subsidiary member stock on or after
March 7, 2002, and prior to March 14,
2003, and on the following day the sub-
sidiary is not a member of the group and
does not have a separate return year, then,
notwithstanding paragraph (f)(1) of this sec-
tion, the common parent may make an ir-
revocable election to reattribute to itself all
or any portion of the losses treated as at-
tributable to such subsidiary member un-
der the principles of§1.1502–21(b)(2)(iv).
The election shall be in the form of a state-
ment filed with or as part of the group’s re-
turn for the taxable year in which the
worthlessness is established or the dispo-
sition occurs. The statement shall be en-
titled“Election under Section 1.1502–
35T(f)(2)”and must state that the common
parent is making an irrevocable election un-
der this paragraph (f)(2) to reattribute to it-
self the losses of the subsidiary member the
stock of which is worthless or disposed of.
In addition, it must identify the subsid-
iary to which the election relates and the
portion of losses subject to the election. If
the election provided in this paragraph is
made, the common parent shall be treated
as succeeding to the reattributed losses as
if the losses were succeeded to in a trans-
action described in section 381(a). For pur-
poses of applying the provisions of
§1.1502–32, the reattributed losses shall be
treated as absorbed by the group immedi-
ately prior to the allowance of any loss or
inclusion of any income or gain with re-
spect to the determination of worthless-
ness or the disposition. In the case of an
election to reattribute less than all of the
losses otherwise treated as attributable to
such subsidiary member under the prin-
ciples of§1.1502–21(b)(2)(iv), paragraph
(f)(1) of this section shall apply to that por-
tion of the losses for which an election un-
der this paragraph (f)(2) is not made.
(g)Anti-avoidance rules—(1)Transfer
of share without a loss in avoidance.If a
share of subsidiary member stock has a ba-
sis that does not exceed its value and the
share is transferred with a view to avoid-
ing application of the rules of paragraph (b)
of this section prior to the transfer of a share
of subsidiary member stock that has a ba-
sis that does exceed its value or a decon-
solidation of a subsidiary member, the rules
of paragraph (b) of this section shall ap-
ply immediately prior to the transfer of
stock that has a basis that does not ex-
ceed its value.
(2)Transfers of loss property in avoid-
ance.If a member of a consolidated group
contributes an asset with a basis that ex-
ceeds its value to a partnership in a trans-
action described in section 721 or a
corporation that is not a member of such
group in a transfer described in section 351,
such partnership or corporation contrib-
utes such asset to a subsidiary member in
a transfer described in section 351, and such
contributions are undertaken with a view to
avoiding the rules of paragraph (b) or (c)
of this section, adjustments must be made
to carry out the purposes of this section.
(3)Anti-loss reimportation—(i)Appli-
cation.This paragraph (g)(3) applies if—
(A) A member of a group recognizes and
is allowed a loss on the disposition of a
share of stock of a subsidiary member with
respect to which there is a duplicated loss;
and
(B) Within the 10-year period begin-
ning on the date the subsidiary member (or
any successor) ceases to be a member of
such group—
(1) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) owns
any asset that has a basis in excess of value
at such time and that was owned by the
subsidiary member (or any successor) on
the date of a disposition of stock of such
subsidiary member (or any successor) and
that had a basis in excess of value on such
date;
(2) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) owns
any asset that has a basis in excess of value
at such time and that has a basis that re-
flects, directly or indirectly, in whole or in
part, the basis of any asset that was owned
by the subsidiary member on the date of a
disposition of stock of such subsidiary
member (or any successor) and that had a
basis in excess of value on such date;
(3) In a transaction described in sec-
tion 381 or section 351, any member of
such group (or any successor group) ac-
quires any asset of the subsidiary mem-
ber (or any successor) that was owned by
the subsidiary member (or any successor)
on the date of a disposition of stock of such
2003–13 I.R.B.656March 31, 2003

subsidiary member (or any successor) and
that had a basis in excess of its value on
such date, or any asset that has a basis that
reflects, directly or indirectly, in whole or
in part, the basis of any asset that was
owned by the subsidiary member (or any
successor) on the date of a disposition of
stock of such subsidiary member (or any
successor) and that had a basis in excess of
its value on such date, and, immediately af-
ter the acquisition of such asset, such as-
set has a basis in excess of its value;
(4) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) has
a liability (within the meaning of section
358(h)(3)) that it had on the date of a dis-
position of stock of such subsidiary mem-
ber (or any successor) and such liability will
give rise to a deduction;
(5) In a transaction described in sec-
tion 381 or section 351, any member of
such group (or any successor group) as-
sumes a liability (within the meaning of sec-
tion 358(h)(3)) that was a liability of the
subsidiary member (or any successor) on
the date of a disposition of stock of such
subsidiary member (or any successor);
(6) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) has
any losses or deferred deductions that were
losses or deferred deductions of the sub-
sidiary member (or any successor) on the
date of a disposition of stock of such sub-
sidiary member (or any successor);
(7) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) has
any losses or deferred deductions that are
attributable to any asset that was owned by
the subsidiary member (or any successor)
on the date of a disposition of stock of such
subsidiary member (or any successor) and
that had a basis in excess of value on such
date;
(8) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) has
any losses or deferred deductions that are
attributable to any asset that had a basis that
reflected, directly or indirectly, in whole or
in part, the basis of any asset that was
owned by the subsidiary member (or any
successor) on the date of a disposition of
stock of such subsidiary member (or any
successor) and that had a basis in excess of
value on such date;
(9) The subsidiary member (or any suc-
cessor) again becomes a member of such
group (or any successor group) when the
subsidiary member (or any successor) has
any losses or deferred deductions that are
attributable to a liability (within the mean-
ing of section 358(h)(3)) that it had on the
date of a disposition of stock of such sub-
sidiary member (or any successor);
(10) Any member of such group (or any
successor group) succeeds to any losses or
deferred deductions of the subsidiary mem-
ber (or any successor) that were losses or
deferred deductions of the subsidiary mem-
ber (or any successor) on the date of a dis-
position of stock of such subsidiary member
(or any successor), that are attributable to
any asset that was owned by the subsid-
iary member (or any successor) on the date
of a disposition of stock of such subsid-
iary member (or any successor) and that had
a basis in excess of value on such date, that
are attributable to any asset that had a ba-
sis that reflected, directly or indirectly, in
whole or in part, the basis of any asset that
was owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had a basis in ex-
cess of value on such date, or that are at-
tributable to a liability (within the meaning
of section 358(h)(3)) of the subsidiary mem-
ber (or any successor) on the date of a dis-
position of stock of such subsidiary member
(or any successor); or
(11) Any losses or deferred deductions
of the subsidiary member (or any succes-
sor) that were losses or deferred deduc-
tions of the subsidiary member (or any
successor) on the date of a disposition of
stock of such subsidiary member (or any
successor), that are attributable to any as-
set that was owned by the subsidiary mem-
ber (or any successor) on the date of a
disposition of stock of such subsidiary
member (or any successor) and that had a
basis in excess of value on such date, that
are attributable to any asset that had a ba-
sis that reflected, directly or indirectly, in
whole or in part, the basis of any asset that
was owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had a basis in ex-
cess of value on such date, or that are at-
tributable to a liability (within the meaning
of section 358(h)(3)) of the subsidiary mem-
ber (or any successor) on the date of a dis-
position of stock of such subsidiary member
(or any successor) are carried back to a pre-
disposition taxable year of the subsidiary
member.
(ii)Operating rules.(A) For purposes of
paragraph (g)(3)(i)(B) of this section, as-
sets shall include stock and securities and
the subsidiary member (or any successor)
shall be treated as having its allocable share
of losses and deferred deductions of all
lower-tier subsidiary members and as own-
ing its allocable share of each asset of all
lower-tier subsidiary members.
(B) For purposes of paragraphs
(g)(3)(i)(B)(6), (7), (8), and (9)ofthissec-
tion, unless the group can establish other-
wise, if the subsidiary member (or any
successor) again becomes a member of such
group (or any successor group) at a time
when the subsidiary member (or any suc-
cessor) has any losses or deferred deduc-
tions, such losses and deferred deductions
shall be treated as losses or deferred de-
ductions that were losses or deferred de-
ductions of the subsidiary member (or any
successor) on the date of a disposition of
stock of such subsidiary member (or any
successor), losses or deferred deductions that
are attributable to assets that were owned
by the subsidiary member (or any succes-
sor) on the date of a disposition of stock
of such subsidiary member (or any suc-
cessor) and that had bases in excess of value
on such date, losses or deferred deduc-
tions that are attributable to assets that had
bases that reflected, directly or indirectly,
in whole or in part, the bases of assets that
were owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had bases in ex-
cess of value on such date, or losses or de-
ferred deductions attributable to a liability
(within the meaning of section 358(h)(3))
of the subsidiary member (or any succes-
sor) on the date of a disposition of stock
of such subsidiary member (or any suc-
cessor).
(C) For purposes of paragraph
(g)(3)(i)(B)(10) of this section, unless the
group can establish otherwise, if a mem-
ber of such group (or any successor group)
succeeds to any losses or deferred deduc-
tions of the subsidiary member (or any suc-
March 31, 20036572003–13 I.R.B.

cessor), such losses and deferred deductions
shall be treated as losses or deferred de-
ductions that were losses or deferred de-
ductions of the subsidiary member (or any
successor) on the date of a disposition of
stock of such subsidiary member (or any
successor), losses or deferred deductions that
are attributable to assets that were owned
by the subsidiary member (or any succes-
sor) on the date of a disposition of stock
of such subsidiary member (or any suc-
cessor) and that had bases in excess of value
on such date, losses or deferred deduc-
tions that are attributable to assets that had
bases that reflected, directly or indirectly,
in whole or in part, the bases of assets that
were owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had bases in ex-
cess of value on such date, or losses or de-
ferred deductions attributable to a liability
(within the meaning of section 358(h)(3))
of the subsidiary member (or any succes-
sor) on the date of a disposition of stock
of such subsidiary member (or any suc-
cessor).
(D) For purposes of paragraph
(g)(3)(i)(B)(11) of this section, unless the
group can establish otherwise, if any losses
or deferred deductions of the subsidiary
member (or any successor) are carried back
to a pre-disposition taxable year of the sub-
sidiary member, such losses and deferred
deductions shall be treated as losses or de-
ferred deductions that were losses or de-
ferred deductions of the subsidiary member
(or any successor) on the date of a dispo-
sition of stock of such subsidiary mem-
ber (or any successor), losses or deferred
deductions that are attributable to assets that
were owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had a basis in ex-
cess of value on such date, losses or de-
ferred deductions that are attributable to
assets that had bases that reflected, di-
rectly or indirectly, in whole or in part, the
bases of assets that were owned by the sub-
sidiary member (or any successor) on the
date of a disposition of stock of such sub-
sidiary member (or any successor) and that
had a basis in excess of value on such date,
or losses or deferred deductions that are at-
tributable to a liability (within the mean-
ing of section 358(h)(3)) of the subsidiary
member (or any successor) on the date of
a disposition of stock of such subsidiary
member (or any successor).
(iii)Loss disallowance.If this para-
graph (g)(3) applies, then, to the extent that
the aggregate amount of loss recognized by
members of the group (and any successor
group) on dispositions of the subsidiary
member stock was attributable to a dupli-
cated loss of such subsidiary member that
was allowed, such group (or any succes-
sor group) will be denied the use of—
(A) Any loss recognized that is attrib-
utable to, directly or indirectly, an asset that
was owned by the subsidiary member (or
any successor) on the date of a disposi-
tion of stock of such subsidiary member (or
any successor) and that had a basis in ex-
cess of value on such date, to the extent of
the lesser of the loss inherent in such as-
set on the date of a disposition of the stock
of the subsidiary member (or any succes-
sor) and the loss inherent in such asset on
the date of the event described in para-
graph (g)(3)(i)(B) of this section that gives
rise to the application of this paragraph
(g)(3);
(B) Any loss recognized that is attrib-
utable to, directly or indirectly, an asset that
has a basis that reflects, directly or indi-
rectly, in whole or in part, the basis of any
asset that was owned by the subsidiary
member (or any successor) on the date of
a disposition of stock of such subsidiary
member (or any successor) and that had a
basis in excess of its value on such date,
to the extent of the lesser of the loss in-
herent in the asset that was owned by the
subsidiary member (or any successor) on
the date of a disposition of stock of such
subsidiary member (or any successor) the
basis of which is reflected, directly or in-
directly, in whole or in part, in the basis of
such asset on the date of the disposition and
the loss inherent in such asset on the date
of the event described in paragraph
(g)(3)(i)(B) of this section that gives rise
to the application of this paragraph (g)(3);
(C) Any loss or deduction that is attrib-
utable to a liability described in paragraph
(g)(3)(i)(B)(4)or(5) of this section; and
(D) Any loss or deduction described in
paragraph (g)(3)(i)(B)(6), (7), (8), (9), (10),
or (11) of this section, provided that a loss
or deferred deduction described in para-
graph (g)(3)(i)(B)(11) of this section shall
be allowed to be carried forward to a post-
disposition taxable year of the subsidiary
member.
(iv)Treatment of disallowed loss.For
purposes of§1.1502–32(b)(3)(iii), any loss
or deduction the use of which is disal-
lowed pursuant to paragraph (g)(3)(iii) of
this section (other than a loss or deduc-
tion described in paragraph (g)(3)(i)(B)(11)
of this section), and with respect to which
no waiver described in§1.1502–32(b)(4) is
filed, is treated as a noncapital, nondeduct-
ible expense incurred during the taxable
year that such loss would otherwise be ab-
sorbed.
(4)Avoidance of recognition of gain.(i)
If a transaction is structured with a view to,
and has the effect of, deferring or avoid-
ing the recognition of gain on a disposi-
tion of stock by invoking the application of
paragraph (b)(1) of this section to redeter-
mine the basis of stock of a subsidiary
member, and the stock loss that gives rise
to the application of paragraph (b)(1) of this
section is not significant, paragraphs (b) and
(c) of this section shall not apply.
(ii) If a transaction is structured with a
view to, and has the effect of, deferring or
avoiding the recognition of gain on a dis-
position of stock by invoking the applica-
tion of paragraph (b)(2) of this section to
redetermine the basis of stock of a subsid-
iary member, and the duplicated loss of the
subsidiary member that is reflected in stock
of the subsidiary member owned by mem-
bers of the group immediately before the
deconsolidation is not significant, para-
graphs (b) and (c) of this section shall not
apply.
(5)Examples.The principles of this para-
graph (g) are illustrated by the following
examples:
Example 1. Transfers of property in avoidance of
basis redetermination rule.(i)Facts.In Year 1, P forms
S with a contribution of $100 in exchange for 100
shares of common stock of S which at that time rep-
resents all of the outstanding stock of S. S becomes
a member of the P group. In Year 2, P contributes 20
shares of common stock of S to PS, a partnership, in
exchange for a 20 percent capital and profits inter-
est in a transaction described in section 721. In Year
3, P contributes Asset A with a basis of $50 and a
value of $20 to PS in exchange for an additional capi-
tal and profits interest in PS in a transaction de-
scribed in section 721. Also in Year 3, PS contributes
Asset A to S and P contributes an additional $80 to
S in transfers to which section 351 applies. In Year
4, S sells Asset A for $20, recognizing a loss of $30.
The P group uses that loss to offset income of P. Also
in Year 4, P sells its entire interest in PS for $40, rec-
ognizing a loss of $30.
(ii)Analysis.Pursuant to paragraph (g)(2) of this
section, if P’s contributions of S stock and Asset A
to PS were undertaken with a view to avoiding the
application of the basis redetermination or the loss sus-
2003–13 I.R.B.658March 31, 2003

pension rule, adjustments must be made such that the
group does not obtain more than one tax benefit from
the $30 loss inherent in Asset A.
Example 2. Transfers effecting a reimportation of
loss.(i)Facts.In Year 1, P forms S with a contribu-
tion of Asset A with a value of $100 and a basis of
$120, Asset B with a value of $50 and a basis of $70,
Asset C with a value of $90 and a basis of $100 in
exchange for all of the common stock of S and S be-
comes a member of the P group. In Year 2, in a trans-
action that is not part of a plan that includes the
contribution, P sells the stock of S for $240, recog-
nizing a loss of $50. At such time, the bases and val-
ues of Assets A, B, and C have not changed since their
contribution to S. In Year 3, S sells Asset A, recog-
nizing a $20 loss. In Year 3, S merges into M in a re-
organization described in section 368(a)(1)(A). In Year
8, P purchases all of the stock of M for $300. At that
time, M has a $10 net operating loss. In addition, M
owns Asset D, which was acquired in an exchange de-
scribed in section 1031 in connection with the sur-
render of Asset B. Asset C has a value of $80 and a
basis of $100. Asset D has a value of $60 and a ba-
sis of $70. In Year 9, P has operating income of $100
and M recognizes $20 of loss on the sale of Asset C.
In Year 10, P has operating income of $50 and M rec-
ognizes $50 of loss on the sale of Asset D.
(ii)Analysis.P’s $50 loss on the sale of S stock
is entirely attributable to duplicated loss. Therefore,
pursuant to paragraph (g)(3) of this section, assum-
ing the P group cannot establish otherwise, M’s $10
net operating loss is treated as attributable to assets
that were owned by S on the date of the disposition
and that had bases in excess of value on such date.
Without regard to any other limitations on the group’s
use of M’s net operating loss, the P group cannot use
M’s $10 net operating loss pursuant to paragraph
(g)(3)(iii)(D) of this section. Pursuant to paragraph
(g)(3)(iv) of this section and§1.1502–32T(b)(3)(iii)(D),
such loss is treated as a noncapital, nondeductible ex-
pense of M incurred during the taxable year that in-
cludes the day after the reorganization. In addition, the
P group is denied the use of $10 of the loss recog-
nized on the sale of Asset C. Finally, the P group is
denied the use of $10 of the loss recognized on the
sale of Asset D. Pursuant to paragraph (g)(3)(iv) of
this section and§1.1502–32T(b)(3)(iii)(D), each such
disallowed loss is treated as a noncapital, nondeduct-
ible expense of M incurred during the taxable year that
includes the date of the disposition of the asset with
respect to which such loss was recognized.
Example 3. Transfers to avoid recognition of gain.
(i)Facts.P owns all of the stock of S1 and S2. The
S2 stock has a basis of $400 and a value of $500. S1
owns 50% of the stock of the S3 common stock with
a basis of $150. S2 owns the remaining 50% of the
S3 common stock with a basis of $100 and a value
of $200 and one share of S3 preferred stock with a
basis of $10 and a value of $9. P intends to sell all
of its S2 stock to an unrelated buyer. P, therefore, en-
gages in the following steps to dispose of S2 with-
out recognizing a substantial portion of the built-in gain
in S2. First, P causes a recapitalization of S3 in which
S2’s S3 common stock is exchanged for new S3 pre-
ferred shares. P then sells all of its S2 stock. Imme-
diately after the sale of the S2 stock, S3 is a member
of the P group.
(ii)Analysis.Pursuant to paragraph (b)(4) of this
section, because S2 owns stock of S3 (another sub-
sidiary member of the same group) and, immedi-
ately after the sale of the S2 stock, S3 is a member
of the group, then for purposes of applying para-
graph (b) of this section, S2 is deemed to have trans-
ferred its S3 stock. Because S3 is a member of the
group immediately after the transfer of the S2 stock
and the S3 stock deemed transferred has a basis in ex-
cess of value, the group member’s basis in the S3 stock
is redetermined pursuant to paragraph (b)(1) of this
section immediately prior to the sale of the S2 stock.
Pursuant to paragraph (b)(1) of this section, the to-
tal basis of S3 stock held by members of the P group
is allocated first to the S3 preferred shares, up to their
value of $209, and then to the remaining shares of S3
common held by S1. S2’s aggregate basis in the S3
preferred stock is increased from $110 to $209. This
increase tiers up and increases P’s basis in the S2 stock
from $400 to $499. Accordingly, P will recognize only
$1 of gain on the sale of its S2 stock. However, be-
cause the recapitalization of S3 was structured with
a view to, and has the effect of, avoiding the recog-
nition of gain on a disposition of stock by invoking
the application of paragraph (b) of this section, para-
graph (g)(4)(i) of this section applies. Accordingly,
paragraph (b) of this section does not apply upon P’s
disposition of the S2 stock and P recognizes $100 of
gain on the disposition of the S2 stock.
(h)Application of other anti-abuse rules.
The rules of this section do not preclude the
application of anti-abuse rules under other
provisions of the Internal Revenue Code and
regulations thereunder.
(i) [Reserved].
(j)Effective date.This section, except for
paragraph (g)(3) of this section, applies with
respect to stock transfers, deconsolida-
tions of subsidiary members, determina-
tions of worthlessness, and stock
dispositions on or after March 7, 2002, and
no later than March 11, 2006, but only if
such events occur during a taxable year the
original return for which is due (without re-
gard to extensions) after March 14, 2003.
Paragraph (g)(3) of this section applies to
events described in paragraph (g)(3)(iii) of
this section occurring on or after October
18, 2002, and no later than March 11, 2006,
but only if such events occur during a tax-
able year the original return for which is due
(without regard to extensions) after March
14, 2003.
Par. 8. The authority citation for part 602
continues to read as follows:
Authority: 26 U.S.C. 7805***
Par.9.In§602.101, paragraph (b) is
amended by adding an entry to the table in
numerical order to read as follows:
§602.101 OMB Control numbers.
*****
(b)***
CFR part or section where
identified and described
Current OMB
control No.
*****
1.1502–35T................................................................................................................................................. 1545–1828
*****
David A. Mader,
Assistant Deputy Commissioner
of Internal Revenue.
Approved March 7, 2003.
Pamela F. Olson,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on March 11, 2003,
1:04 p.m., and published in the issue of the Federal Regis-
ter for March 14, 2003, 68 F.R. 12287)
Section 6621.—Determina-
tion of Interest Rate
26 CFR 301.6621–1: Interest rate.
Interest rates; underpayments and
overpayments.The rate of interest deter-
mined under section 6621 of the Code
for the calendar quarter beginning April 1,
2003, will be 5 percent for overpayments
(4 percent in the case of a corporation), 5
percent for underpayments, and 7 percent
for large corporate underpayments. The rate
of interest paid on the portion of a corpo-
rate overpayment exceeding $10,000 will
be 2.5 percent.
March 31, 20036592003–13 I.R.B.

Rev. Rul. 2003–30
Section 6621 of the Internal Revenue
Code establishes the rates for interest on tax
overpayments and tax underpayments. Un-
der§6621(a)(1), the overpayment rate be-
ginning April 1, 2003, is the sum of the
federal short-term rate plus 3 percentage
points (2 percentage points in the case of
a corporation), except the rate for the por-
tion of a corporate overpayment of tax ex-
ceeding $10,000 for a taxable period is the
sum of the federal short-term rate plus 0.5
of a percentage point for interest compu-
tations made after December 31, 1994. Un-
der§6621(a)(2), the underpayment rate is
the sum of the federal short-term rate plus
3 percentage points.
Section 6621(c) provides that for pur-
poses of interest payable under§6601 on
any large corporate underpayment, the un-
derpayment rate under§6621(a)(2) is de-
termined by substituting“5 percentage
points”for“3 percentage points.”See
§6621(c) and§301.6621–3 of the Regu-
lations on Procedure and Administration for
the definition of a large corporate under-
payment and for the rules for determin-
ing the applicable date. Section 6621(c) and
§301.6621–3 are generally effective for pe-
riods after December 31, 1990.
Section 6621(b)(1) provides that the Sec-
retary will determine the federal short-
term rate for the first month in each
calendar quarter.
Section 6621(b)(2)(A) provides that the
federal short-term rate determined under
§6621(b)(1) for any month applies dur-
ing the first calendar quarter beginning af-
ter such month.
Section 6621(b)(2)(B) provides that in
determining the addition to tax under§6654
for failure to pay estimated tax for any tax-
able year, the federal short-term rate that ap-
plies during the third month following such
taxable year also applies during the first 15
days of the fourth month following such
taxable year.
Section 6621(b)(3) provides that the fed-
eral short-term rate for any month is the
federal short-term rate determined during
such month by the Secretary in accordance
with§1274(d), rounded to the nearest full
percent (or, if a multiple of 1/2 of 1 per-
cent, the rate is increased to the next high-
est full percent).
Notice 88–59, 1988–1 C.B. 546, an-
nounced that, in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under§6621, the
Internal Revenue Service will use the fed-
eral short-term rate based on daily com-
pounding because that rate is most
consistent with§6621 which, pursuant to
§6622, is subject to daily compounding.
Rounded to the nearest full percent, the
federal short-term rate based on daily com-
pounding determined during the month of
January 2003 is 2 percent. Accordingly, an
overpayment rate of 5 percent (4 percent
in the case of a corporation) and an under-
payment rate of 5 percent are established
for the calendar quarter beginning April 1,
2003. The overpayment rate for the por-
tion of a corporate overpayment exceed-
ing $10,000 for the calendar quarter
beginning April 1, 2003, is 2.5 percent. The
underpayment rate for large corporate un-
derpayments for the calendar quarter be-
ginning April 1, 2003, is 7 percent. These
rates apply to amounts bearing interest dur-
ing that calendar quarter.
The 5 percent rate also applies to esti-
mated tax underpayments for the first cal-
endar quarter in 2003 and for the first 15
days in April 2003.
Interest factors for daily compound in-
terest for annual rates of 2.5 percent, 4 per-
cent, 5 percent, and 7 percent are published
in Tables 10, 13, 15, and 19 of Rev. Proc.
95–17, 1995–1 C.B. 556, 564, 567, 569, and
573.
Annual interest rates to be compounded
daily pursuant to§6622 that apply for prior
periods are set forth in the tables accom-
panying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Raymond Bailey of the Office of As-
sociate Chief Counsel (Procedure &
Administration), Administrative Provi-
sions & Judicial Practice Division. For fur-
ther information regarding this revenue
ruling, contact Mr. Bailey at (202) 622–
6226 (not a toll-free call).
TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975–PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATE
In 1995–1 C.B.
DAILY RATE TABLE
Before Jul. 1, 19756%Table 2, pg. 557
Jul. 1, 1975—Jan. 31, 19769%Table 4, pg. 559
Feb. 1, 1976—Jan. 31, 19787%Table 3, pg. 558
Feb. 1, 1978—Jan. 31, 19806%Table 2, pg. 557
Feb. 1, 1980—Jan. 31, 198212%Table 5, pg. 560
Feb. 1, 1982—Dec. 31, 198220%Table 6, pg. 560
Jan. 1, 1983—Jun. 30, 198316%Table 37, pg. 591
Jul. 1, 1983—Dec. 31, 198311%Table 27, pg. 581
Jan. 1, 1984—Jun. 30, 198411%Table 75, pg. 629
Jul. 1, 1984—Dec. 31, 198411%Table 75, pg. 629
Jan. 1, 1985—Jun. 30, 198513%Table 31, pg. 585
2003–13 I.R.B.660March 31, 2003

TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975–PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS—Continued
PERIODRATE
In 1995–1 C.B.
DAILY RATE TABLE
Jul. 1, 1985—Dec. 31, 198511%Table 27, pg. 581
Jan. 1, 1986—Jun. 30, 198610%Table 25, pg. 579
Jul. 1, 1986—Dec. 31, 19869%Table 23, pg. 577
TABLE OF INTEREST RATES
FROM JAN. 1, 1987–DEC. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATETABLEPGRATETABLEPG
Jan. 1, 1987—Mar. 31, 19878%215759%23577
Apr. 1, 1987—Jun. 30, 19878%215759%23577
Jul. 1, 1987—Sep. 30, 19878%215759%23577
Oct. 1, 1987—Dec. 31, 19879%2357710%25579
Jan. 1, 1988—Mar. 31, 198810%7362711%75629
Apr. 1, 1988—Jun. 30, 19889%7162510%73627
Jul. 1, 1988—Sep. 30, 19889%7162510%73627
Oct. 1, 1988—Dec. 31, 198810%7362711%75629
Jan. 1, 1989—Mar. 31, 198910%2557911%27581
Apr. 1, 1989—Jun. 30, 198911%2758112%29583
Jul. 1, 1989—Sep. 30, 198911%2758112%29583
Oct. 1, 1989—Dec. 31, 198910%2557911%27581
Jan. 1, 1990—Mar. 31, 199010%2557911%27581
Apr. 1, 1990—Jun. 30, 199010%2557911%27581
Jul. 1, 1990—Sep. 30, 199010%2557911%27581
Oct. 1, 1990—Dec. 31, 199010%2557911%27581
Jan. 1, 1991—Mar. 31, 199110%2557911%27581
Apr. 1, 1991—Jun. 30, 19919%2357710%25579
Jul. 1, 1991—Sep. 30, 19919%2357710%25579
Oct. 1, 1991—Dec. 31, 19919%2357710%25579
Jan. 1, 1992—Mar. 31, 19928%696239%71625
Apr. 1, 1992—Jun. 30, 19927%676218%69623
Jul. 1, 1992—Sep. 30, 19927%676218%69623
Oct. 1, 1992—Dec. 31, 19926%656197%67621
Jan. 1, 1993—Mar. 31, 19936%175717%19573
Apr. 1, 1993—Jun. 30, 19936%175717%19573
Jul. 1, 1993—Sep. 30, 19936%175717%19573
Oct. 1, 1993—Dec. 31, 19936%175717%19573
Jan. 1, 1994—Mar. 31, 19946%175717%19573
Apr. 1, 1994—Jun. 30, 19946%175717%19573
Jul. 1, 1994—Sep. 30, 19947%195738%21575
Oct. 1, 1994—Dec. 31, 19948%215759%23577
Jan. 1, 1995—Mar. 31, 19958%215759%23577
March 31, 20036612003–13 I.R.B.

TABLE OF INTEREST RATES
FROM JAN. 1, 1987–DEC. 31, 1998—Continued
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATETABLEPGRATETABLEPG
Apr. 1, 1995—Jun. 30, 19959%2357710%25579
Jul. 1, 1995—Sep. 30, 19958%215759%23577
Oct. 1, 1995—Dec. 31, 19958%215759%23577
Jan. 1, 1996—Mar. 31, 19968%696239%71625
Apr. 1, 1996—Jun. 30, 19967%676218%69623
Jul. 1, 1996—Sep. 30, 19968%696239%71625
Oct. 1, 1996—Dec. 31, 19968%696239%71625
Jan. 1, 1997—Mar. 31, 19978%215759%23577
Apr. 1, 1997—Jun. 30, 19978%215759%23577
Jul. 1, 1997—Sep. 30, 19978%215759%23577
Oct. 1, 1997—Dec. 31, 19978%215759%23577
Jan. 1, 1998—Mar. 31, 19988%215759%23577
Apr. 1, 1998—Jun. 30, 19987%195738%21575
Jul. 1, 1998—Sep. 30, 19987%195738%21575
Oct. 1, 1998—Dec. 31, 19987%195738%21575
TABLE OF INTEREST RATES
FROM JANUARY 1, 1999–PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B.
RATETABLEPAGE
Jan. 1, 1999—Mar. 31, 19997%19573
Apr. 1, 1999—Jun. 30, 19998%21575
Jul. 1, 1999—Sep. 30, 19998%21575
Oct. 1, 1999—Dec. 31, 19998%21575
Jan. 1, 2000—Mar. 31, 20008%69623
Apr. 1, 2000—Jun. 30, 20009%71625
Jul. 1, 2000—Sep. 30, 20009%71625
Oct. 1, 2000—Dec. 31, 20009%71625
Jan. 1, 2001—Mar. 31, 20019%23577
Apr. 1, 2001—Jun. 30, 20018%21575
Jul. 1, 2001—Sep. 30, 20017%19573
Oct. 1, 2001—Dec. 31, 20017%19573
Jan. 1, 2002—Mar. 31, 20026%17571
Apr. 1, 2002—Jun. 30, 20026%17571
Jul. 1, 2002—Sep. 30, 20026%17571
Oct. 1, 2002—Dec. 31, 20026%17571
Jan 1, 2003—Mar. 31, 20035%15569
Apr. 1, 2003—Jun. 30, 20035%15569
2003–13 I.R.B.662March 31, 2003

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999–PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATETABLEPGRATETABLEPG
Jan. 1, 1999—Mar. 31, 19996%175717%19573
Apr. 1, 1999—Jun. 30, 19997%195738%21575
Jul. 1, 1999—Sep. 30, 19997%195738%21575
Oct. 1, 1999—Dec. 31, 19997%195738%21575
Jan. 1, 2000—Mar. 31, 20007%676218%69623
Apr. 1, 2000—Jun. 30, 20008%696239%71625
Jul. 1, 2000—Sep. 30, 20008%696239%71625
Oct. 1, 2000—Dec. 31, 20008%696239%71625
Jan. 1, 2001—Mar. 31, 20018%215759%23577
Apr. 1, 2001—Jun. 30, 20017%195738%21575
Jul. 1, 2001—Sep. 30, 20016%175717%19573
Oct. 1, 2001—Dec. 31, 20016%175717%19573
Jan. 1, 2002—Mar. 31, 20025%155696%17571
Apr. 1, 2002—Jun. 30, 20025%155696%17571
Jul. 1, 2002—Sep. 30, 20025%155696%17571
Oct. 1, 2002—Dec. 31, 20025%155696%17571
Jan. 1, 2003—Mar. 31, 20034%135675%15569
Apr. 1, 2003—Jun. 30, 20034%135675%15569
TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991–PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1991—Mar. 31, 199113%31585
Apr. 1, 1991—Jun. 30, 199112%29583
Jul. 1, 1991—Sep. 30, 199112%29583
Oct. 1, 1991—Dec. 31, 199112%29583
Jan. 1, 1992—Mar. 31, 199211%75629
Apr. 1, 1992—Jun. 30, 199210%73627
Jul. 1, 1992—Sep. 30, 199210%73627
Oct. 1, 1992—Dec. 31, 19929%71625
Jan. 1, 1993—Mar. 31, 19939%23577
Apr. 1, 1993—Jun. 30, 19939%23577
Jul. 1, 1993—Sep. 30, 19939%23577
Oct. 1, 1993—Dec. 31, 19939%23577
Jan. 1, 1994—Mar. 31, 19949%23577
Apr. 1, 1994—Jun. 30, 19949%23577
Jul. 1, 1994—Sep. 30, 199410%25579
Oct. 1, 1994—Dec. 31, 199411%27581
Jan. 1, 1995—Mar. 31, 199511%27581
Apr. 1, 1995—Jun. 30, 199512%29583
Jul. 1, 1995—Sep. 30, 199511%27581
March 31, 20036632003–13 I.R.B.

TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991–PRESENT—Continued
1995–1 C.B.
RATETABLEPG
Oct. 1, 1995—Dec. 31, 199511%27581
Jan. 1, 1996—Mar. 31, 199611%75629
Apr. 1, 1996—Jun. 30, 199610%73627
Jul. 1, 1996—Sep. 30, 199611%75629
Oct. 1, 1996—Dec. 31, 199611%75629
Jan 1, 1997—Mar. 31, 199711%27581
Apr. 1, 1997—Jun. 30, 199711%27581
Jul. 1, 1997—Sep. 30, 199711%27581
Oct. 1, 1997—Dec. 31, 199711%27581
Jan. 1, 1998—Mar. 31, 199811%27581
Apr. 1, 1998—Jun. 30, 199810%25579
Jul. 1, 1998—Sep. 30, 199810%25579
Oct. 1, 1998—Dec. 31, 199810%25579
Jan. 1, 1999—Mar. 31, 19999%23577
Apr. 1, 1999—Jun. 30, 199910%25579
Jul. 1, 1999—Sep. 30, 199910%25579
Oct. 1, 1999—Dec. 31, 199910%25579
Jan. 1, 2000—Mar. 31, 200010%73627
Apr. 1, 2000—Jun. 30, 200011%75629
Jul. 1, 2000—Sep. 30, 200011%75629
Oct. 1, 2000—Dec. 31, 200011%75629
Jan. 1, 2001—Mar. 31, 200111%27581
Apr. 1, 2001—Jun. 30, 200110%25579
Jul. 1, 2001—Sep. 30, 20019%23577
Oct. 1, 2001—Dec. 31, 20019%23577
Jan. 1, 2002—Mar. 31, 20028%21575
Apr. 1, 2002—Jun. 30, 20028%21575
Jul. 1, 2002—Sep. 30, 20028%21575
Oct. 1, 2002—Dec. 30, 20028%21575
Jan. 1, 2003—Mar. 31, 20037%19573
Apr. 1, 2003—Jun. 30, 20037%19573
TABLE OF INTEREST RATES FOR
CORPORATE OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995–PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1995—Mar. 31, 19956.5%18572
Apr. 1, 1995—Jun. 30, 19957.5%20574
Jul. 1, 1995—Sep. 30, 19956.5%18572
Oct. 1, 1995—Dec. 31, 19956.5%18572
Jan. 1, 1996—Mar. 31, 19966.5%66620
Apr. 1, 1996—Jun. 30, 19965.5%64618
Jul. 1, 1996—Sep. 30, 19966.5%66620
2003–13 I.R.B.664March 31, 2003

TABLE OF INTEREST RATES FOR
CORPORATE OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995–PRESENT—Continued
1995–1 C.B.
RATETABLEPG
Oct. 1, 1996—Dec. 31, 19966.5%66620
Jan. 1, 1997—Mar. 31, 19976.5%18572
Apr. 1, 1997—Jun. 30, 19976.5%18572
Jul. 1, 1997—Sep. 30, 19976.5%18572
Oct. 1, 1997—Dec. 31, 19976.5%18572
Jan. 1, 1998—Mar. 31, 19986.5%18572
Apr. 1, 1998—Jun. 30, 19985.5%16570
Jul. 1, 1998—Sep. 30, 19985.5%16570
Oct. 1, 1998—Dec. 31, 19985.5%16570
Jan. 1, 1999—Mar. 31, 19994.5%14568
Apr. 1, 1999—Jun. 30, 19995.5%16570
Jul. 1, 1999—Sep. 30, 19995.5%16570
Oct. 1, 1999—Dec. 31, 19995.5%16570
Jan. 1, 2000—Mar. 31, 20005.5%64618
Apr. 1, 2000—Jun. 30, 20006.5%66620
Jul. 1, 2000—Sep. 30, 20006.5%66620
Oct. 1, 2000—Dec. 31, 20006.5%66620
Jan. 1, 2001—Mar. 31, 20016.5%18572
Apr. 1, 2001—Jun. 30, 20015.5%16570
Jul. 1, 2001—Sep. 30, 20014.5%14568
Oct. 1, 2001—Dec. 31, 20014.5%14568
Jan. 1, 2002—Mar. 31, 20023.5%12566
Apr. 1, 2002—Jun. 30, 20023.5%12566
Jul. 1, 2002—Sep. 30, 20023.5%12566
Oct. 1, 2002—Dec. 31, 20023.5%12566
Jan. 1, 2003—Mar. 31, 20032.5%10564
Apr. 1, 2003—Jun. 30, 20032.5%10564
March 31, 20036652003–13 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement; determina-
tion of correct tax liability.
(Also Part I,§911, 1.911–1.)
Rev. Proc. 2003–26
SECTION 1. PURPOSE
.01 This revenue procedure provides in-
formation to any individual who failed to
meet the eligibility requirements of
§911(d)(1) of the Internal Revenue Code
because adverse conditions in a foreign
country precluded the individual from meet-
ing those requirements for taxable year
2002.
.02 The Internal Revenue Service has
previously listed countries for which the eli-
gibility requirements of§911(d)(1) of the
Code are waived under§911(d)(4) be-
cause of adverse conditions in those coun-
tries on and after the date stated. See Rev.
Proc. 2002–20, 2002–14 I.R.B. 732, Rev.
Proc. 2001–27, 2001–1 C.B. 1155, and Rev.
Proc. 2000–14, 2000–1 C.B. 960. This rev-
enue procedure lists countries added to the
list in 2002, for which the eligibility re-
quirements of§911(d)(1) are waived. Rev.
Proc. 2002–20, Rev. Proc. 2001–27, and
Rev. Proc. 2000–14 remain in full force and
effect.
SECTION 2. BACKGROUND
.01 Section 911(a) of the Code allows
a“qualified individual,”as defined in
§911(d)(1), to exclude foreign earned in-
come and housing cost amounts from gross
income. Section 911(c)(3) of the Code al-
lows a qualified individual to deduct hous-
ing cost amounts from gross income.
.02 Section 911(d)(1) of the Code de-
fines the term“qualified individual”as an
individual whose tax home is in a foreign
country and who is (A) a citizen of the
United States and establishes to the satis-
faction of the Secretary of the Treasury that
the individual has been abona fideresi-
dent of a foreign country or countries for
an uninterrupted period that includes an en-
tire taxable year, or (B) a citizen or resi-
dent of the United States who, during any
period of 12 consecutive months, is present
in a foreign country or countries during at
least 330 full days.
.03 Section 911(d)(4) of the Code pro-
vides an exception to the eligibility re-
quirements of§911(d)(1). An individual
will be treated as a qualified individual with
respect to a period in which the individual
was abona fideresident of, or was present
in, a foreign country if the individual left
the country during a period for which the
Secretary of the Treasury, after consulta-
tion with the Secretary of State, deter-
mines that individuals were required to
leave because of war, civil unrest, or simi-
lar adverse conditions that precluded the
normal conduct of business. An individual
must establish that but for those condi-
tions the individual could reasonably have
been expected to meet the eligibility re-
quirements.
.04 For 2002, the Secretary of the Trea-
sury in consultation with the Secretary of
State has determined that war, civil un-
rest, or similar adverse conditions that pre-
cluded the normal conduct of business
existed in the following countries begin-
ning on the specified date:
Date of Departure
CountryOn or after
Central African Republic10/31/02
Côte d’Ivoire10/18/02
Indonesia10/13/02
Madagascar04/13/02
Pakistan03/22/02
Venezuela12/20/02
.05 Accordingly, for purposes of§911
of the Code, an individual who left one of
the foregoing countries on or after the speci-
fied departure date shall be treated as a
qualified individual with respect to the pe-
riod during which that individual was
present in, or was abona fideresident of,
such foreign country, if the individual es-
tablishes a reasonable expectation of meet-
ing the requirements of§911(d) but for
those conditions.
.06 To qualify for relief under
§911(d)(4) of the Code, an individual must
have established residency, or have been
physically present, in the foreign country
on or prior to the date that the Secretary of
the Treasury determines that individuals
were required to leave the foreign coun-
try. Individuals who establish residency, or
are first physically present, in the foreign
country after the date that the Secretary pre-
scribes shall not be treated as qualified in-
dividuals under§911(d)(4) of the Code. For
example, individuals who are first physi-
cally present in the Central African Re-
public after October 31, 2002, are not
eligible to qualify for the exception pro-
vided in§911(d)(4) of the Code for tax-
able year 2002.
.07 In order to assist those individuals
who are filing prior year or amended tax
returns, the Internal Revenue Service is re-
publishing the countries listed for tax years
1999, 2000, and 2001, for which the eli-
gibility requirements of§911(d)(1) of the
Code are waived under§911(d)(4):
2003–13 I.R.B.666March 31, 2003

Tax Year 1999—
Date of Departure
CountryOn or after
EritreaFebruary 12, 1999
EthiopiaFebruary 12, 1999
Serbia-MontenegroMarch 20, 1999
Tax Year 2000—
Date of Departure
CountryOn or after
EritreaMay 19, 2000
Tax Year 2001—
Date of Departure
CountryOn or after
MacedoniaJuly 27, 2001
SECTION 3. INQUIRIES
A taxpayer who needs assistance on how
to claim this exclusion, or on how to file
an amended return, should contact a local
IRS Office or, for a taxpayer residing or
traveling outside the United States, the near-
est overseas IRS office.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2002–20, 2002–14 I.R.B. 732,
is supplemented.
DRAFTING INFORMATION
The principal author of this revenue pro-
cedure is Kate Y. Hwa of the Office of As-
sociate Chief Counsel (International). For
further information regarding this revenue
procedure, contact Ms. Hwa at (202) 622–
3840 (not a toll-free call).
26 CFR 601.105: Examination of returns and
claim for refund, credit, or abatement; determina-
tion of correct tax liability.
(Also§§6050I, 1.605I–1.)
Rev. Proc. 2003–27
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance on the information reporting require-
ments under§6050I of the Internal
Revenue Code for small cash transactions
that involve the rental of taxicabs on a daily
shift basis.
SECTION 2. BACKGROUND
.01 Taxi fleet owners rent their taxi-
cabs to taxi drivers under a variety of leas-
ing practices. In some cases, taxi fleet
owners and taxi drivers enter into formal
lease agreements in which the taxi fleet
owner grants the taxi driver the right to use
a taxicab on a daily shift basis for an agreed
payment per daily shift and for a fixed pe-
riod of time. In other cases, the rental is
based on the business practices and the on-
going business relationship between the taxi
fleet owner and the taxi driver for the regu-
lar use of a taxicab on a daily shift basis.
These situations may involve leases with-
out a fixed period of time, or an arrange-
ment in which there is no formal lease.
Under these situations, the taxi fleet owner
grants the taxi driver the right to use the
taxicab on a recurring, daily shift basis pur-
suant to agreed terms that the taxi fleet
owner or the taxi driver can alter or ter-
minate at the end of each daily shift. Nei-
ther the taxi fleet owner nor the taxi driver
has an obligation to continue the rental ar-
rangement. Taxi fleet owners have ques-
tioned whether their leasing practices make
the rentals of taxicabs on a daily shift ba-
sis“related transactions”within the mean-
ing of§6050I and§1.6050I–1(c)(7)(ii) of
the Income Tax Regulations.
.02 Section 6050I(a) provides that any
person who is engaged in a trade or busi-
ness, and who, in the course of such trade
or business, receives more than $10,000 in
cash in one transaction (or two or more re-
lated transactions), shall make the return de-
scribed in§6050I(b) with respect to such
transaction (or related transactions) at such
time as the Secretary may by regulations
prescribe.
.03 Section 1.6050I–1(b) provides that
the receipt of multiple cash deposits or cash
installment payments (or other similar pay-
ments or prepayments) on or after Janu-
ary 1, 1990, relating to a single transaction
(or two or more related transactions), is re-
ported as set forth in§1.6050I–1(b)(1)
through (b)(3).
.04 Section 1.6050I–1(b)(1) provides that
if the initial payment is in excess of
$10,000, the recipient must report the ini-
tial payment within 15 days of its receipt.
.05 Section 1.6050I–1(b)(2) provides that
if the initial payment does not exceed
$10,000 then the recipient must aggre-
gate the initial payment and subsequent pay-
ments made within one year of the initial
payment until the aggregate amount ex-
ceeds $10,000, and report the aggregate
amount within 15 days after receiving the
payment that causes the aggregate amount
to exceed $10,000.
.06 Section 1.6050I–1(b)(3) provides
that, in addition to any other required re-
port, a report must be made each time that
previously unreportable payments made
within a 12-month period with respect to
a single transaction (or two or more re-
lated transactions), individually or in the ag-
gregate, exceed $10,000.
.07 Section 1.6050I–1(c)(7)(i) defines the
term“transaction”as the underlying event
precipitating the payer’s transfer of cash to
the recipient. The term“transaction”in-
cludes a rental of real or personal prop-
erty. A transaction may not be divided into
March 31, 20036672003–13 I.R.B.

multiple transactions in order to avoid re-
porting under§6050I.
.08 Section 1.6050I–1(c)(7)(ii) defines
“related transactions”as any transaction
conducted between a payer (or its agent)
and a recipient of cash in a 24-hour pe-
riod. Additionally, transactions conducted
between a payer (or its agent) and a cash
recipient during a period of more than 24
hours are related if the recipient knows or
has reason to know that each transaction is
one of a series of connected transactions.
SECTION 3. SCOPE
This revenue procedure describes how
the Internal Revenue Service (Service) will
treat certain rentals of taxicabs for a daily
shift for purposes of the information re-
porting requirements under§6050I of the
Code and the regulations.
SECTION 4. APPLICATION
If a taxi fleet owner rents a taxicab on
a daily shift basis to a taxi driver under a
formal lease or a daily shift arrangement
based on the ongoing business relation-
ship between the taxi fleet owner and the
taxi driver, the Service will not treat the
rental for a daily shift as part of a series of
connected transactions under§1.6050I–
1(c)(7)(ii) if—
(1) The rent for the shift does not ex-
ceed $150 and is not paid during a 24-
hour period within which the payments
made by, or on behalf of, the driver ex-
ceed $150; and
(2) Neither the taxi fleet owner nor the
taxi driver has an obligation to continue the
daily shift rental arrangement.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
March 31, 2003.
SECTION 6. DRAFTING INFORMA-
TION
The principal author of this revenue pro-
cedure is Tiffany P. Smith of the Office of
the Associate Chief Counsel (Procedure and
Administration), Administrative Provi-
sions and Judicial Practice Division. For fur-
ther information regarding this revenue
procedure, contact Tiffany P. Smith at (202)
622–4910 (not a toll-free call).
2003–13 I.R.B.668March 31, 2003

Part IV. Items of General Interest
Notice of Proposed Rulemak-
ing by Cross-Reference to
Temporary Regulation; With-
drawal of Notice of Proposed
Rulemaking; and Notice of
Public Hearing
Guidance Under Section
1502; Suspension of Losses
on Certain Stock Dispositions
REG–131478–02
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemak-
ing by cross-reference to temporary regu-
lations; withdrawal of notice of proposed
rulemaking; and notice of public hearing.
SUMMARY: In T.D. 9048 on page 644 of
this issue of the Bulletin, the IRS is issu-
ing temporary regulations under section
1502 that redetermine the basis of stock of
a subsidiary member of a consolidated
group immediately prior to certain trans-
fers of such stock. In addition, temporary
regulations suspend certain losses recog-
nized on the disposition of such stock. The
regulations apply to corporations filing con-
solidated returns. The text of the tempo-
rary regulations serves as the text of these
proposed regulations. This document also
provides notice of a public hearing on these
proposed regulations.
DATES: Written or electronic comments
must be received by June 12, 2003. Out-
lines of topics to be discussed at the pub-
lic hearing scheduled for June 20, 2003, at
10 a.m., must be received by May 30, 2003.
ADDRESSES: Send submissions to:
CC:PA:RU (REG–131478–02), room 5226,
Internal Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions may be hand delivered Mon-
day through Friday between the hours of
8 a.m. and 4 p.m. to CC:PA:RU (REG–
131478–02), Courier’s Desk, Internal Rev-
enue Service,1111Constitution Avenue,
NW, Washington, DC 20044. Alternatively,
taxpayers may submit electronic comments
directly to the IRS Internet site at
www.irs.gov/regs. The public hearing will
be held in the IRS Auditorium, Internal
Revenue Service Building,1111Constitu-
tion Avenue, NW, Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Aimee K. Meacham, (202) 622–7530;
concerning submissions of comments, the
hearing, and/or to be placed on the build-
ing access list to attend the hearing,
Sonya M. Cruse, (202) 622–7180 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Manage-
ment and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the col-
lection of information should be sent to the
Office of Management and Budget,Attn:
Desk Officer for the Department of the
Treasury, Office of Information and Regu-
latory Affairs, Washington, DC 20503, with
copies to theInternal Revenue Service,
Attn: IRS Reports Clearance Officer,
W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of in-
formation should be received by May 13,
2003.
Comments are specifically requested
concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS,
including whether the information will have
practical utility;
The accuracy of the estimated burden as-
sociated with the proposed collection of in-
formation (see below);
How the quality, utility, and clarity of the
information to be collected may be en-
hanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the applica-
tion of automated collection techniques or
other forms of information technology; and
Estimates of capital or start-up costs and
costs of operation, maintenance, and pur-
chase of services to provide information.
The collection of information in these
proposed regulations is in§§1.1502–35T(c),
1.1502–35T(c)(5)(iii), 1.1502–35T(f)(2) and
1.1502–35T(g)(3). This information is re-
quired by the IRS to verify compliance with
section 1502. This information will be used
to determine whether the amount of tax has
been calculated correctly. The collection of
information is required to properly deter-
mine the amount permitted to be taken into
account as a loss. The respondents are cor-
porations filing consolidated returns. The
collection of information is required to ob-
tain a benefit.
Estimated total annual reporting and/or
recordkeeping burden: 15,000 hours.
Estimated average annual burden per re-
spondent and/or recordkeeper: 2 hours.
Estimated number of respondents and/or
recordkeepers: 7,475.
Estimated annual frequency of responses:
on occasion.
An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information unless
it displays a valid control number assigned
by the Office of Management and Bud-
get.
Books or records relating to a collec-
tion 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
Temporary regulations in this issue of the
Bulletin amend the Income Tax Regula-
tions (26 CFR part 1) relating to section
1502. The text of those regulations also
serves as the text of these proposed regu-
lations. The preamble to the temporary regu-
lations contains a full explanation of the
reasons underlying the issuance of the pro-
posed regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Ex-
ecutive Order 12866. Therefore, a regulatory
assessment is not required. It is hereby cer-
tified that these regulations do not have a
significant impact on a substantial num-
ber of small entities. This certification is
based on the fact that these regulations will
primarily affect affiliated groups of corpo-
rations, which tend to be larger businesses.
March 31, 20036692003–13 I.R.B.

Moreover, the number of taxpayers af-
fected and the average burden are mini-
mal. Therefore, a Regulatory Flexibility
Analysis is not required. Pursuant to sec-
tion 7805(f) of the Internal Revenue Code,
these regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small businesses.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
The IRS and Treasury Department request
comments on the clarity of the proposed
regulations and how they may be made
easier to understand. All comments will be
available for public inspection and copy-
ing.
A public hearing has been scheduled for
June 20, 2003, beginning at 10 a.m. in the
IRS Auditorium, Internal Revenue Build-
ing,1111Constitution Avenue, NW, Wash-
ington, DC. Due to building security
procedures, visitors must enter at the Con-
stitution Avenue entrance. In addition, all
visitors must present photo identification to
enter the building. Because of access re-
strictions, visitors will not be admitted be-
yond the immediate entrance area more than
30 minutes before the hearing starts. For in-
formation about having your name placed
on the building access list to attend the hear-
ing, see the“FOR FURTHER INFORMA-
TION CONTACT”portion of this
preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments must submit writ-
ten or electronic comments and an out-
line of the topics to be discussed and the
time to be devoted to each topic (a signed
original and eight (8) copies) by May 30,
2000. A period of 10 minutes will be al-
lotted to each person for making com-
ments. An agenda showing the scheduling
of the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Aimee K. Meacham of the Office
of Associate Chief Counsel (Corporate),
IRS. However, other personnel from the IRS
and Treasury Department participated in
their development.
*****
Proposed Amendments to the Regula-
tions
Accordingly, proposed regulations pub-
lished on October 23, 2002 (REG–131478–
02, 2002–47 I.R.B. 892 [67 FR 65066]) are
withdrawn, and 26 CFR part 1 is proposed
to be amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805***
26 U.S.C. 1502***
Par. 2. Section 1.1502–21 is amended by:
1. Revising paragraph (b)(1).
2. Adding paragraph (b)(3)(v) and (h)(7).
The revision and addition read as
follows:
§1.1502–21 Net operating losses.
*****
(b)***
(1) [The text of the proposed amend-
ment to§1.1502–21(b)(1) is the same as the
text of§1.1502–21T(b)(1) published else-
where in this issue of theFederal Regis-
ter].
*****
(3)***
(v) [The text of the proposed amend-
ment to§1.1502–21(b)(3)(v) is the same as
the text of§1.1502–21T(b)(3)(v) published
elsewhere in this issue of theFederal Reg-
ister].
*****
(h)***
(7) [The text of the proposed amend-
ment to§1.1502–21(h)(7) is the same as the
text of§1.1502–21T(h)(7) published else-
where in this issue of theFederal Regis-
ter].
Par. 3. Section 1.1502–32 is amended by:
1. Revising paragraphs (a)(2) and (h).
2. Adding paragraphs (b)(3)(iii)(C),
(b)(3)(iii)(D), (b)(3)(vi), and (h)(6).
The revision and additions read as
follows:
§1.1502–32 Investment adjustments.
*****
(a)(2) [The proposed amendment to
§1.1502–32(a)(2) is the same as§1.1502–
32T(a)(2) published elsewhere in this is-
sue of theFederal Register].
*****
(b)***(1)***
(3)***
(iii)***
(C) and (D) [The proposed amendment
to§1.1502–32(b)(3)(iii)(C) and (b)(3)(iii)(D)
are the same as§1.1502–32T(b)(3)(iii)(C)
and (b)(3)(iii)(D) published elsewhere in this
issue of theFederal Register].
*****
(4)(i)***
(vi) [The proposed amendment to
§1.1502–32(b)(4)(vi) is the same as
§1.1502–32T(b)(4)(vi) published elsewhere
in this issue of theFederal Register].
*****
(h)(6) [The proposed amendment to
§1.1502–32(h)(6) is the same as§1.1502–
32T(h)(6) published elsewhere in this is-
sue of theFederal Register].
Par. 4. Section 1.1502–35 is added to
read as follows:
§1.1502–35 Transfers and issuances of
subsidiary member stock.
[The text of proposed§1.1502–35 is the
same as the text of§1.1502–35T published
elsewhere in this issue of theFederal Reg-
ister].
*****
David A. Mader,
Assistant Deputy Commissioner
of Internal Revenue.
(Filed by the Office of the Federal Register on March 11, 2003,
1:04 p.m., and published in the issue of the Federal Regis-
ter for March 14, 2003, 68 F.R. 12324)
2003–13 I.R.B.670March 31, 2003

Announcement of Disciplinary Actions Involving Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled
Actuaries—Suspensions, Censures, Disbarments, and
Resignations
Announcement 2003–15
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified pub-
lic accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before the
Internal Revenue Service if the assistance
relates to a matter constituting practice be-
fore the Internal Revenue Service and may
not knowingly aid or abet another person
to practice before the Internal Revenue Ser-
vice during a period of suspension, disbar-
ment, or ineligibility of such other person.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify persons to whom these
restrictions apply, the Director, Office of
Professional Responsibility will announce
in the Internal Revenue Bulletin their
names, their city and state, their profes-
sional designation, the effective date of dis-
ciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulle-
tins for five successive weeks.
Suspensions From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an
administrative law judge, the following in-
dividuals have been placed under suspen-
sion from practice before the Internal
Revenue Service:
NameAddressDesignationEffective Date
Cramer, GeorgeChicago, ILCPAJanuary 18, 2003
to
January 17, 2005
Disbarments From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an
administrative law judge, the following in-
dividuals have been disbarred from prac-
tice before the Internal Revenue Service:
NameAddressDesignationEffective Date
Whalley, Christopher J.Ellsworth, MEAttorneyJuly 28, 2002
Chapin, Frank L.Sandpoint, IDEnrolled AgentAugust 13, 2002
Engstrand Jr., Edward E.Minneapolis, MNCPANovember 2, 2002
Fisher, JoannaPortland, OREnrolled AgentNovember 15, 2002
Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid institution or con-
clusion of a proceeding for his or her dis-
barment or suspension from practice before
March 31, 20036712003–13 I.R.B.

the Internal Revenue Service, may offer his
or her consent to suspension from such
practice. The Director, Office of Profes-
sional Responsibility, in his discretion, may
suspend an attorney, certified public ac-
countant, enrolled agent or enrolled actu-
ary in accordance with the consent offered.
The following individuals have been
placed under consent suspension from prac-
tice before the Internal Revenue Service:
NameAddressDesignationDate of Suspension
Kuhajda, BenPlainfield, ILCPAAugust 26, 2002
to
August 24, 2005
Vaughn, James A.Albuquerque, NMCPAOctober 1, 2002
to
September 29, 2004
McBroom, ByronManteca, CACPAOctober 21, 2002
to
October 19, 2006
Jacobs, RobertPhiladelphia, PAAttorneyOctober 21, 2002
to
April 20, 2006
Kwak, JongBeverly Hills, CAAttorneyOctober 22, 2002
to
October 20, 2003
Smith, Frank L.Brooksville, FLAttorneyNovember 1, 2002
to
October 30, 2005
Schwartz, Kenneth J.Woodland Hills, CAAttorneyNovember 1, 2002
to
February 27, 2006
Agulnick, Barry W.New York, NYAttorneyNovember 1, 2002
to
April 29, 2004
O’Connor, Thomas P.Palos Park, ILCPANovember 1, 2002
to
October 20, 2003
Brand, Joe A.Dundee, OHCPANovember 18, 2002
to
November 16, 2004
Battino, StevenPlainview, NYCPANovember 25, 2002
to
May 23, 2004
Chipman, KenFarmington, NMEnrolled AgentDecember 1, 2002
to
November 29, 2003
2003–13 I.R.B.672March 31, 2003

NameAddressDesignationDate of Suspension
Kirgis, Grant A.Rochester, MNCPADecember 1, 2002
to
May 30, 2003
Welch, FrankStamford, CTCPAIndefinite
from
January 31, 2003
Pickens, ValerieSeattle, WACPAJanuary 1, 2003
to
December 30, 2004
Kidd, Roger F.Philadelphia, PAAttorneyJanuary 20, 2003
to
April 18, 2003
Sullivan, RaymondSonoma, CAAttorneyMarch 15, 2003
to
November 14, 2003
Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice be-
fore the Internal Revenue Service any prac-
titioner who, within five years from the date
the expedited proceeding is instituted (1) has
had a license to practice as an attorney, cer-
tified public accountant, or actuary sus-
pended or revoked for cause or (2) has been
convicted of certain crimes.
The following individuals have been
placed under suspension from practice be-
fore the Internal Revenue Service by vir-
tue of the expedited proceeding provisions:
NameAddressDesignationDate of Suspension
Pirro, Anthony G.South Salem, NYCPAIndefinite
from
June 26, 2002
Scott, RogerBuffalo, NYAttorneyIndefinite
from
August 12, 2002
Patrick, GeorgeCheshire, CTCPAIndefinite
from
September 9, 2002
Rochon, Jason B.Lafayette, LAAttorneyIndefinite
from
September 9, 2002
Voccola, EdwardHingham, MAAttorneyIndefinite
from
October 18, 2002
March 31, 20036732003–13 I.R.B.

NameAddressDesignationDate of Suspension
Linn, Charles B.Croton-on-Hudson, NYAttorneyIndefinite
from
October 18, 2002
Lum, Eugene K.H.Long Beach, CAAttorneyIndefinite
from
October 18, 2002
Gwilliam, PeterLynn, MACPAIndefinite
from
October 28, 2002
Herlehy, Jon L.McHenry, ILCPAIndefinite
from
October 28, 2002
Herndon, HenryPikeville, NCCPAIndefinite
from
November 1, 2002
McCurry, ToddDurham, NCAttorneyIndefinite
from
November 25, 2002
Adams, James L.Breckenridge, COAttorneyIndefinite
from
November 25, 2002
Cloer, StewartPlano, TXAttorneyIndefinite
from
December 13, 2002
Caruso, RobertSaddle River, NJCPAIndefinite
from
December 16, 2002
Duru, Ike E.Atlanta, GAAttorneyIndefinite
from
January 10, 2003
Pelletier, Richard A.Bolton, CTCPAIndefinite
from
January 10, 2003
Austin, JackSteamboat Springs, COCPAIndefinite
from
January 10, 2003
Gibson, Brian M.Monroe, NYAttorneyIndefinite
from
January 10, 2003
Jackson, RobertMt. Juliet, TNAttorneyIndefinite
from
January 10, 2003
2003–13 I.R.B.674March 31, 2003

NameAddressDesignationDate of Suspension
Tenzer, James L.East Meadow, NYAttorneyIndefinite
from
February 4, 2003
Resignations of Enrolled Agents
Under Title 31, Code of Federal Regu-
lations, Part 10, an enrolled agent, in or-
der to avoid the institution or conclusion of
a proceeding for his or her disbarment or
suspension from practice before the Inter-
nal Revenue Service, may offer his or her
resignation as an enrolled agent. The Di-
rector, Office of Professional Responsibil-
ity, in his discretion, may accept the offered
resignation.
The Director, Office of Professional Re-
sponsibility, has accepted offers of resig-
nation as an enrolled agent from the
following individuals:
NameAddressDate of Resignation
Korman, LindaLas Vegas, NVJanuary 23, 2003
Additional Relief for Certain
Estates Affected by the
September 11, 2001,
Terrorist Attack
Announcement 2003–18
This announcement supplements and ex-
pands the relief granted under section
7508A of the Internal Revenue Code in No-
tice 2001–61, 2001–2 C.B. 305, Notice
2001–68, 2001–2 C.B. 504, and Notice
2002–40, 2002–24 I.R.B. 1152, for cer-
tain taxpayers affected by the September 11,
2001, Terrorist Attack. In Notice 2002–
40, the Department of the Treasury and the
Internal Revenue Service (IRS) granted re-
lief from the running of interest and the fail-
ure to pay penalty relating to certain
payments for which Notice 2001–61 or No-
tice 2001–68 had extended or postponed the
due dates. Notice 2002–40 applies only to
income taxes and certain excise and em-
ployment taxes. The Department of the
Treasury and the IRS now extend the re-
lief from the running of interest and the fail-
ure to pay penalty described in Notice
2002–40 to estate tax payments associ-
ated with Form 706, theUnited States Es-
tate (and Generation-Skipping Transfer) Tax
Return(estate tax return), for which No-
tice 2001–61 or Notice 2001–68 extended
or postponed the due dates, for the period
of the extension or postponement provided
in Notice 2001–61 or Notice 2001–68.
Relief under this announcement applies
to all affected taxpayers described in No-
tice 2001–61 who were required to file an
estate tax return for which Notice 2001–61
or Notice 2001–68 extended or postponed
the due date. This generally will include any
such affected taxpayer filing an estate tax
return: (i) for which tax records neces-
sary to meet the filing or payment dead-
line were located in the covered disaster
area (as defined in Notice 2001–61); (ii)
signed and filed by a person whose prin-
cipal residence, was located in the cov-
ered disaster area; or (iii) signed and filed
by a corporate fiduciary whose place of
business from which the corporate fidu-
ciary primarily administered estate mat-
ters was located in the covered disaster area.
The IRS already may have assessed in-
terest and penalties eligible for relief un-
der this announcement, and the affected
taxpayers may have already paid these
amounts. The IRS is not able to identify the
affected taxpayers who are eligible for re-
lief under this announcement. If an af-
fected taxpayer believes that the affected
taxpayer is eligible for relief under this an-
nouncement, that affected taxpayer will need
to contact the IRS. Such affected taxpay-
ers should call the Estate and Gift Tax De-
partment’s toll-free number at (866) 699–
4083, Monday through Friday, 7:00 a.m. to
7:00 p.m., based on the caller’s local time.
Alternatively, such affected taxpayers may
write to the Cincinnati Compliance Ser-
vice Center, Estate and Gift Tax Depart-
ment, Attn: Stop 824, 201 W. River Center
Blvd., Covington, KY 41011.
This announcement was drafted by the
Office of Associate Chief Counsel, Proce-
dure and Administration (Administrative
Provisions and Judicial Practice Division).
March 31, 20036752003–13 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as“rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
withmodified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modifiedis used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it
applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revokeddescribes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example,modified
andsupersededdescribes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case,
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F. R .—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
2003–13 I.R.B.iMarch 31, 2003

Numerical Finding List
1
Bulletins 2003–1 through 2003–12
Announcements:
2003–1, 2003–2 I.R.B.281
2003–2, 2003–3 I.R.B.301
2003–3, 2003–4 I.R.B.361
2003–4, 2003–5 I.R.B.396
2003–5, 2003–5 I.R.B.397
2003–6, 2003–6 I.R.B.450
2003–7, 2003–6 I.R.B.450
2003–8, 2003–6 I.R.B.451
2003–9, 2003–7 I.R.B.490
2003–10, 2003–7 I.R.B.490
2003–11, 2003–10 I.R.B.585
2003–12, 2003–10 I.R.B.585
2003–13, 2003–11 I.R.B.603
2003–14, 2003–11 I.R.B.603
2003–15, 2003–11 I.R.B.605
2003–16, 2003–12 I.R.B.641
Notices:
2003–1, 2003–2 I.R.B.257
2003–2, 2003–2 I.R.B.257
2003–3, 2003–2 I.R.B.258
2003–4, 2003–3 I.R.B.294
2003–5, 2003–3 I.R.B.294
2003–6, 2003–3 I.R.B.298
2003–7, 2003–4 I.R.B.310
2003–8, 2003–4 I.R.B.310
2003–9, 2003–5 I.R.B.369
2003–10, 2003–5 I.R.B.369
2003–11, 2003–6 I.R.B.422
2003–12, 2003–6 I.R.B.422
2003–13, 2003–8 I.R.B.513
2003–14, 2003–8 I.R.B.515
2003–15, 2003–9 I.R.B.540
2003–16, 2003–10 I.R.B.575
2003–17, 2003–12 I.R.B.633
Proposed Regulations:
REG–209500–86, 2003–2 I.R.B.262
REG–104385–01, 2003–12 I.R.B.634
REG–116641–01, 2003–8 I.R.B.518
REG–125638–01, 2003–5 I.R.B.373
REG–126016–01, 2003–7 I.R.B.486
REG–126485–01, 2003–9 I.R.B.542
REG–103580–02, 2003–9 I.R.B.543
REG–124069–02, 2003–7 I.R.B.488
REG–138882–02, 2003–8 I.R.B.522
REG–139768–02, 2003–10 I.R.B.583
REG–151043–02, 2003–3 I.R.B.300
REG–164464–02, 2003–2 I.R.B.262
Revenue Procedures:
2003–1, 2003–1 I.R.B.1
2003–2, 2003–1 I.R.B.76
2003–3, 2003–1 I.R.B.113
2003–4, 2003–1 I.R.B.123
2003–5, 2003–1 I.R.B.163
2003–6, 2003–1 I.R.B.191
2003–7, 2003–1 I.R.B.233
2003–8, 2003–1 I.R.B.236
Revenue Procedures—Continued:
2003–9, 2003–8 I.R.B.516
2003–10, 2003–2 I.R.B.259
2003–11, 2003–4 I.R.B.311
2003–12, 2003–4 I.R.B.316
2003–13, 2003–4 I.R.B.317
2003–14, 2003–4 I.R.B.319
2003–15, 2003–4 I.R.B.321
2003–16, 2003–4 I.R.B.359
2003–17, 2003–6 I.R.B.427
2003–18, 2003–6 I.R.B.439
2003–19, 2003–5 I.R.B.371
2003–20, 2003–6 I.R.B.445
2003–21, 2003–6 I.R.B.448
2003–22, 2003–10 I.R.B.577
2003–23, 2003–11 I.R.B.599
2003–24, 2003–11 I.R.B.599
2003–25, 2003–11 I.R.B.601
Revenue Rulings:
2003–1, 2003–3 I.R.B.291
2003–2, 2003–2 I.R.B.251
2003–3, 2003–2 I.R.B.252
2003–4, 2003–2 I.R.B.253
2003–5, 2003–2 I.R.B.254
2003–6, 2003–3 I.R.B.286
2003–7, 2003–5 I.R.B.363
2003–8, 2003–3 I.R.B.290
2003–9, 2003–4 I.R.B.303
2003–10, 2003–3 I.R.B.288
2003–11, 2003–3 I.R.B.285
2003–12, 2003–3 I.R.B.283
2003–13, 2003–4 I.R.B.305
2003–14, 2003–4 I.R.B.302
2003–15, 2003–4 I.R.B.302
2003–16, 2003–6 I.R.B.401
2003–17, 2003–6 I.R.B.400
2003–18, 2003–7 I.R.B.467
2003–19, 2003–7 I.R.B.468
2003–20, 2003–7 I.R.B.465
2003–21, 2003–8 I.R.B.509
2003–22, 2003–8 I.R.B.494
2003–23, 2003–8 I.R.B.511
2003–24, 2003–10 I.R.B.557
2003–26, 2003–10 I.R.B.563
2003–27, 2003–11 I.R.B.597
2003–28, 2003–11 I.R.B.594
2003–29, 2003–11 I.R.B.587
Treasury Decisions:
9024, 2003–5 I.R.B.365
9025, 2003–5 I.R.B.362
9026, 2003–5 I.R.B.366
9027, 2003–6 I.R.B.413
9028, 2003–6 I.R.B.415
9029, 2003–6 I.R.B.403
9030, 2003–8 I.R.B.495
9031, 2003–8 I.R.B.504
9032, 2003–7 I.R.B.471
9033, 2003–7 I.R.B.483
9034, 2003–7 I.R.B.453
9035, 2003–9 I.R.B.528
9036, 2003–9 I.R.B.533
9037, 2003–9 I.R.B.535
Treasury Decisions—Continued:
9038, 2003–9 I.R.B.524
9039, 2003–10 I.R.B.561
9040, 2003–10 I.R.B.568
9041, 2003–8 I.R.B.510
9042, 2003–10 I.R.B.564
9043, 2003–12 I.R.B.611
9045, 2003–12 I.R.B.610
9046, 2003–12 I.R.B.614
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2002–26 through 2002–52 is
in Internal Revenue Bulletin 2003–1, dated January 6, 2003.
March 31, 2003ii2003–13 I.R.B.

Finding List of Current Actions
on Previously Published Items
2
Bulletins 2003–1 through 2003–12
Notices:
97–19
Modified by
Rev. Proc. 2003–1, 2003–1 I.R.B.1
2001–26
Obsoleted by
T.D. 9032, 2003–7 I.R.B.471
2001–46
Modified by
Notice 2003–6, 2003–3 I.R.B.298
2001–69
Modified and superseded by
Notice 2003–1, 2003–2 I.R.B.257
2002–27
Clarified by
Notice 2003–3, 2003–2 I.R.B.258
2002–46
Modified by
Notice 2003–10, 2003–5 I.R.B.369
Proposed Regulations:
REG–209500–86
Corrected by
Ann. 2003–6, 2003–6 I.R.B.450
REG–103829–99
Corrected by
Ann. 2003–12, 2003–10 I.R.B.585
REG–126485–01
Withdrawn by
REG–126485–01, 2003–9 I.R.B.542
REG–143321–02
Corrected by
Ann. 2003–12, 2003–10 I.R.B.585
REG–164464–02
Corrected by
Ann. 2003–6, 2003–6 I.R.B.450
Revenue Procedures:
83–23
Supplemented by
Rev. Proc. 2003–21, 2003–6 I.R.B.448
84–37
Modified by
Rev. Proc. 2003–1, 2003–1 I.R.B.1
93–38
Obsoleted by
Rev. Proc. 2003–15, 2003–4 I.R.B.321
97–31
Modified by
Rev. Proc. 2003–9, 2003–8 I.R.B.516
Revenue Procedures—Continued:
98–13
Obsoleted by
T.D. 9032, 2003–7 I.R.B.471
2002–1
Superseded by
Rev. Proc. 2003–1, 2003–1 I.R.B.1
2002–2
Superseded by
Rev. Proc. 2003–2, 2003–1 I.R.B.76
2002–3
Superseded by
Rev. Proc. 2003–3, 2003–1 I.R.B.113
2002–4
Superseded by
Rev. Proc. 2003–4, 2003–1 I.R.B.123
2002–5
Superseded by
Rev. Proc. 2003–5, 2003–1 I.R.B.163
2002–6
Superseded by
Rev. Proc. 2003–6, 2003–1 I.R.B.191
2002–7
Superseded by
Rev. Proc. 2003–7, 2003–1 I.R.B.233
2002–8
Superseded by
Rev. Proc. 2003–8, 2003–1 I.R.B.236
2002–9
Modified and amplified by
Rev. Proc. 2003–20, 2003–6 I.R.B.445
Rev. Rul. 2003–3, 2003–2 I.R.B.252
2002–22
Modified by
Rev. Proc. 2003–3, 2003–1 I.R.B.113
2002–29
Modified by
Rev. Proc. 2003–10, 2003–2 I.R.B.259
2002–52
Modified by
Rev. Proc. 2003–1, 2003–1 I.R.B.1
2002–67
Supplemented by
Ann. 2003–3, 2003–4 I.R.B.361
2002–75
Superseded by
Rev. Proc. 2003–3, 2003–1 I.R.B.113
2003–3
Amplified by
Rev. Proc. 2003–14, 2003–4 I.R.B.319
2003–7
Corrected by
Ann. 2003–4, 2003–5 I.R.B396
Revenue Rulings:
53–131
Modified by
Rev. Rul. 2003–12, 2003–3 I.R.B.283
57–190
Obsoleted by
Rev. Rul. 2003–18, 2003–7 I.R.B.467
65–190
Revoked by
Rev. Rul. 2003–3, 2003–2 I.R.B.252
69–372
Revoked by
Rev. Rul. 2003–3, 2003–2 I.R.B.252
92–19
Supplemented in part by
Rev. Rul. 2003–24, 2003–10 I.R.B.557
2003–2
Revoked by
Rev. Rul. 2003–22, 2003–8 I.R.B.494
Treasury Decisions:
9002
Corrected by
Ann. 2003–8, 2003–6 I.R.B.451
9021
Corrected by
Ann. 2003–16, 2003–12 I.R.B.641
9022
Supplemented by
Ann. 2003–7, 2003–6 I.R.B.450
Corrected by
Ann. 2003–11, 2003–10 I.R.B.585
2
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2002–26 through 2002–52 is in Internal Revenue
Bulletin 2003–1, dated January 6, 2003.
2003–13 I.R.B.iii*U.S. Government Printing Office: 2003—496–919/60076March 31, 2003