Final_Temp_Reg-102740-02

For a list of bond factor amounts applicable to dispositions occurring during
other calendar years, see: Rev. Rul.
98–3, 1998–1 C.B. 248; Rev.
Rul.
2001–2, 2001–1 C.B. 255; Rev. Rul.
2001–53, 2001–2 C.B. 488; Rev. Rul.
2002–72, 2002–2 C.B. 759; Rev. Rul.
2003–117, 2003–2 C.B. 1051; and Rev.
Rul. 2004–100, 2004–44 I.R.B. 718.

the period of affiliation, and also affect
purchasers of the stock of members of a
consolidated group.

DRAFTING INFORMATION

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

The principal author of this revenue
ruling is David McDonnell of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). For further information regarding this revenue ruling,
contact Mr. McDonnell at (202) 622–3040
(not a toll-free call).

Section 168.—Accelerated
Cost Recovery System
Transition relief is provided to partnerships and
other pass-thru entities that are treated as holding taxexempt use property because of the application of
§ 168(h)(6). See Notice 2005-29, page 796.

Section 337.—Nonrecognition for Property Distributed
to Parent in Complete Liquidation of Subsidiary
26 CFR 1.337(d)–2: Loss limitation rules.

T.D. 9187
DEPARTMENT OF
THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Loss Limitation Rules
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains final regulations under sections 337(d) and
1502 of the Internal Revenue Code (Code).
These regulations disallow certain losses
recognized on sales of subsidiary stock by
members of a consolidated group. These
regulations apply to corporations filing
consolidated returns, both during and after

March 28, 2005

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

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

778

Estimated number of respondents:
18,360.
Estimated annual frequency of responses: once.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be directed to
the Office of Management and Budget,
Attn: Desk Officer for the Department of
Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503,
with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Office of Management and Budget.
Books or records relating to the collection of information must be retained as
long as their contents may become material in the administration of any Internal
Revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
On March 7, 2002, the IRS and Treasury Department issued a Treasury decision that included temporary regulations
and cross-referencing proposed regulations (T.D. 8984, 2002–1 C.B. 668 [67 FR
11034]; REG–102740–02, 2002–1 C.B.
701) implementing the repeal of the General Utilities doctrine in the consolidated
return context pursuant to the mandate
of section 337(d). Those regulations included §§1.337(d)–2T, 1.1502–20T(i),
and 1.1502–32T(b)(4)(v).
For dispositions and deconsolidations
of subsidiary stock before March 7, 2002,
and dispositions and deconsolidations
of subsidiary stock on or after March
7, 2002, that were effected pursuant to
a binding written contract entered into
before such date that was in continuous
effect until the disposition or deconsolidation, §1.1502–20T(i) permits consolidated
groups to elect to calculate allowable loss
on the sale of subsidiary stock, or the
basis reduction required on the deconsolidation of subsidiary stock, by applying
§1.1502–20 in its entirety, §1.1502–20
without regard to the duplicated loss factor of the loss disallowance formula, or

2005–13 I.R.B.

§1.337(d)–2T. Section 1.337(d)–2T disallows certain losses recognized on sales of
subsidiary stock by members of a consolidated group and, under certain circumstances, requires the basis of subsidiary
stock to be reduced to its value immediately before a deconsolidation of the stock.
For dispositions and deconsolidations on
or after March 7, 2002, unless the disposition or deconsolidation was effected
pursuant to a binding written contract entered into before March 7, 2002, that was
in continuous effect until the disposition
or deconsolidation, groups must apply
§1.337(d)–2T to calculate allowable loss
on the sale of subsidiary stock or the basis
reduction required on the deconsolidation
of subsidiary stock.
The Treasury decision also included
a number of correlative provisions, in
both §§1.1502–20T and 1.1502–32T,
designed to address certain issues that
could arise if a group elected to apply
§1.1502–20 without regard to the duplicated loss factor of the loss disallowance
formula, or §1.337(d)–2T. Technical
changes to §§1.337(d)–2T, 1.1502–20T,
and 1.1502–32T were made by Treasury
decisions 8998, 2002–2 C.B. 1 [67 FR
37998], 9057, 2003–1 C.B. 964 [68 FR
24351], 9118, 2004–15 I.R.B. 718 [69 FR
12799], and 9155, 2004–40 I.R.B. 562 [69
FR 51175].
On August 25, 2004, the IRS issued
Notice 2004–58, 2004–39 I.R.B. 520, describing the basis disconformity method
and announcing that the IRS will accept
that method as a method for determining
whether subsidiary stock loss is disallowed
and subsidiary stock basis is reduced under §1.337(d)–2T. Contemporaneous with
the issuance of the Notice, the IRS and
Treasury Department published temporary
and cross-referencing proposed regulations (T.D. 9154, 2004–40 I.R.B. 560 [69
FR 52419]; REG–135898–04, 2004–40
I.R.B. 568) extending the time for making
an election under §1.1502–20T(i) and permitting taxpayers to amend or revoke prior
elections made under §1.1502–20T(i).
In response to the promulgation of
§1.337(d)–2T and the issuance of Notice
2004–58, the IRS and Treasury Department have received a number of comments
on the regulations, the basis disconformity
method, and, more generally, on the manner in which the repeal of the General

2005–13 I.R.B.

Utilities doctrine should be implemented
in the consolidated group context. The
IRS and Treasury Department have studied and are continuing to study those
comments. In that regard, the IRS and
Treasury Department intend to publish
within the near term proposed regulations
with an alternative approach to this problem. Until those proposed regulations are
published as final or temporary regulations, whether certain losses recognized
on sales of subsidiary stock are disallowed and whether basis of subsidiary
stock must be reduced immediately before
a deconsolidation of the stock will continue to be determined under the rules of
§1.337(d)–2T. Accordingly, this Treasury
decision adopts the rules of §1.337(d)–2T
(as in effect on March 2, 2005) as final
regulation §1.337(d)–2 without substantive change. The IRS will accept the basis
disconformity method as a method for
determining whether subsidiary stock loss
is disallowed and subsidiary stock basis is
reduced under that final regulation.
In addition, to permit taxpayers to
make the election to apply §1.1502–20
without regard to the duplicated loss factor of the loss disallowance rule, or the
rule of §1.337(d)–2, as provided in this
Treasury Decision, this Treasury decision
also adopts the rules of §1.1502–20T and
the correlative rules of §1.1502–32T (as
in effect on March 2, 2005) as final regulations without substantive change.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified
that these regulations will not have a significant economic impact on a substantial
number of small entities. This certification
is based on the fact that these regulations
will primarily affect affiliated groups of
corporations that have elected to file consolidated returns, which tend to be larger
businesses. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the
Code, these regulations will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small business.

779

Drafting Information
The principal authors of these regulations are Theresa Abell and Martin Huck
of the Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
for §1.337(d)–2T and adding an entry in
numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.337(d)–2 also issued under 26
U.S.C. 337(d). * * *
Par. 2. Section 1.337(d)–2 is revised to
read as follows:
§1.337(d)–2 Loss limitation rules.
(a) Loss disallowance—(1) General
rule. No deduction is allowed for any loss
recognized by a member of a consolidated
group with respect to the disposition of
stock of a subsidiary.
(2) Definitions. For purposes of this
section:
(i) The definitions in §1.1502–1 apply.
(ii) Disposition means any event in
which gain or loss is recognized, in whole
or in part.
(3) Coordination with loss deferral and
other disallowance rules. For purposes of
this section, the rules of §1.1502–20(a)(3)
apply, with appropriate adjustments to reflect differences between the approach of
this section and that of §1.1502–20.
(4) Netting. Paragraph (a)(1) of this
section does not apply to loss with respect to the disposition of stock of a subsidiary, to the extent that, as a consequence
of the same plan or arrangement, gain is
taken into account by members with respect to stock of the same subsidiary having the same material terms. If the gain
to which this paragraph applies is less than
the amount of the loss with respect to the
disposition of the subsidiary’s stock, the
gain is applied to offset loss with respect
to each share disposed of as a consequence

March 28, 2005

of the same plan or arrangement in proportion to the amount of the loss deduction that would have been disallowed under paragraph (a)(1) of this section with
respect to such share before the application of this paragraph (a)(4). If the same
item of gain could be taken into account
more than once in limiting the application
of paragraphs (a)(1) and (b)(1) of this section, the item is taken into account only
once.
(b) Basis reduction on deconsolidation—(1) General rule. If the basis of a
member of a consolidated group in a share
of stock of a subsidiary exceeds its value
immediately before a deconsolidation of
the share, the basis of the share is reduced
at that time to an amount equal to its value.
If both a disposition and a deconsolidation
occur with respect to a share in the same
transaction, paragraph (a) of this section
applies and, to the extent necessary to effectuate the purposes of this section, this
paragraph (b) applies following the application of paragraph (a) of this section.
(2) Deconsolidation. Deconsolidation
means any event that causes a share of
stock of a subsidiary that remains outstanding to be no longer owned by a member of any consolidated group of which
the subsidiary is also a member.
(3) Value. Value means fair market
value.
(4) Netting. Paragraph (b)(1) of this
section does not apply to reduce the basis of stock of a subsidiary, to the extent
that, as a consequence of the same plan
or arrangement, gain is taken into account
by members with respect to stock of the
same subsidiary having the same material
terms. If the gain to which this paragraph
applies is less than the amount of basis reduction with respect to shares of the subsidiary’s stock, the gain is applied to offset basis reduction with respect to each
share deconsolidated as a consequence of
the same plan or arrangement in proportion to the amount of the reduction that
would have been required under paragraph
(b)(1) of this section with respect to such
share before the application of this paragraph (b)(4).
(c) Allowable loss—(1) Application.
This paragraph (c) applies with respect
to stock of a subsidiary only if a separate statement entitled §1.337(d)–2(c)
statement is included with the return in

March 28, 2005

accordance with paragraph (c)(3) of this
section.
(2) General rule. Loss is not disallowed
under paragraph (a)(1) of this section and
basis is not reduced under paragraph (b)(1)
of this section to the extent the taxpayer establishes that the loss or basis is not attributable to the recognition of built-in gain,
net of directly related expenses, on the disposition of an asset (including stock and
securities). Loss or basis may be attributable to the recognition of built-in gain
on the disposition of an asset by a prior
group. For purposes of this section, gain
recognized on the disposition of an asset
is built-in gain to the extent attributable,
directly or indirectly, in whole or in part,
to any excess of value over basis that is
reflected, before the disposition of the asset, in the basis of the share, directly or indirectly, in whole or in part, after applying section 1503(e) and other applicable
provisions of the Internal Revenue Code
and regulations. Federal income taxes may
be directly related to built-in gain recognized on the disposition of an asset only
to the extent of the excess (if any) of the
group’s income tax liability actually imposed under Subtitle A of the Internal Revenue Code for the taxable year of the disposition of the asset over the group’s income tax liability for the taxable year redetermined by not taking into account the
built-in gain recognized on the disposition
of the asset. For this purpose, the group’s
income tax liability actually imposed and
its redetermined income tax liability are
determined without taking into account the
foreign tax credit under section 27(a) of the
Internal Revenue Code.
(3) Contents of statement and time of
filing. The statement required under paragraph (c)(1) of this section must be included with or as part of the taxpayer’s return for the year of the disposition or deconsolidation and must contain—
(i) The name and employer identification number (E.I.N.) of the subsidiary; and
(ii) The amount of the loss not disallowed under paragraph (a)(1) of this section by reason of this paragraph (c) and the
amount of basis not reduced under paragraph (b)(1) of this section by reason of
this paragraph (c).
(4) Example. The principles of paragraphs (a), (b), and (c) of this section are illustrated by the examples in
§§1.337(d)–1(a)(5) and 1.1502–20(a)(5)

780

(other than Examples 3, 4, and 5) and (b),
with appropriate adjustments to reflect
differences between the approach of this
section and that of §1.1502–20, and by
the following example. For purposes of
the examples in this section, unless otherwise stated, the group files consolidated
returns on a calendar year basis, the facts
set forth the only corporate activity, and
all sales and purchases are with unrelated
buyers or sellers. The basis of each asset
is the same for determining earnings and
profits adjustments and taxable income.
Tax liability and its effect on basis, value,
and earnings and profits are disregarded.
Investment adjustment system means the
rules of §1.1502–32. The example reads
as follows:
Example. Loss offsetting built-in gain in a prior
group. (i) P buys all the stock of T for $50 in Year
1, and T becomes a member of the P group. T has
2 assets. Asset 1 has a basis of $50 and a value of
$0, and asset 2 has a basis of $0 and a value of $50.
T sells asset 2 during Year 3 for $50 and recognizes
a $50 gain. Under the investment adjustment system,
P’s basis in the T stock increased to $100 as a result of
the recognition of gain. In Year 5, all of the stock of P
is acquired by the P1 group, and the former members
of the P group become members of the P1 group. T
then sells asset 1 for $0, and recognizes a $50 loss.
Under the investment adjustment system, P’s basis in
the T stock decreases to $50 as a result of the loss.
T’s assets decline in value from $50 to $40. P then
sells all the stock of T for $40 and recognizes a $10
loss.
(ii) P’s basis in the T stock reflects both T’s unrecognized gain and unrecognized loss with respect
to its assets. The gain T recognizes on the disposition of asset 2 is built-in gain with respect to both the
P and P1 groups for purposes of paragraph (c)(2) of
this section. In addition, the loss T recognizes on the
disposition of asset 1 is built-in loss with respect to
the P and P1 groups for purposes of paragraph (c)(2)
of this section. T’s recognition of the built-in loss
while a member of the P1 group offsets the effect on
T’s stock basis of T’s recognition of the built-in gain
while a member of the P group. Thus, P’s $10 loss on
the sale of the T stock is not attributable to the recognition of built-in gain, and the loss is therefore not
disallowed under paragraph (c)(2) of this section.
(iii) The result would be the same if, instead of
having a $50 built-in loss in asset 1 when it becomes a
member of the P group, T has a $50 net operating loss
carryover and the carryover is used by the P group.

(d) Successors.
For purposes of
this section, the rules and examples of
§1.1502–20(d) apply, with appropriate
adjustments to reflect differences between
the approach of this section and that of
§1.1502–20.
(e) Anti-avoidance rules. For purposes
of this section, the rules and examples of
§1.1502–20(e) apply, with appropriate adjustments to reflect differences between

2005–13 I.R.B.

the approach of this section and that of
§1.1502–20.
(f) Investment adjustments. For purposes of this section, the rules and examples of §1.1502–20(f) apply, with appropriate adjustments to reflect differences
between the approach of this section and
that of §1.1502–20.
(g) Effective dates. This section applies with respect to dispositions and deconsolidations on or after March 3, 2005.
In addition, this section applies to dispositions and deconsolidations for which an
election is made under §1.1502–20(i)(2) to
determine allowable loss under this section. If loss is recognized because stock
of a subsidiary became worthless, the disposition with respect to the stock is treated
as occurring on the date the stock became
worthless. For dispositions and deconsolidations after March 6, 2002, and before
March 3, 2005, see §1.337(d)–2T as contained in the 26 CFR part 1 in effect on
March 2, 2005.
§1.337(d)–2T [Removed]
Par. 3. Section 1.337(d)–2T is removed.
Par. 4. In §1.1502–20, paragraph (i) is
revised to read as follows:
§1.1502–20 Disposition or
deconsolidation of subsidiary stock.
*****
(i) Limitations on the applicability of
§1.1502–20—(1) Dispositions and deconsolidations on or after March 7, 2002. Except to the extent specifically incorporated
in §1.337(d)–2, paragraphs (a) and (b) of
this section do not apply to a disposition or
deconsolidation of stock of a subsidiary on
or after March 7, 2002, unless the disposition or deconsolidation was effected pursuant to a binding written contract entered
into before March 7, 2002, that was in continuous effect until the disposition or deconsolidation.
(2) Dispositions and deconsolidations
prior to March 7, 2002. In the case of a
disposition or deconsolidation of stock of
a subsidiary by a member before March
7, 2002, or a disposition or deconsolidation on or after March 7, 2002, that was
effected pursuant to a binding written contract entered into before March 7, 2002,
that was in continuous effect until the disposition or deconsolidation, a consolidated

2005–13 I.R.B.

group may determine the amount of the
member’s allowable loss or basis reduction by applying this section in its entirety,
or, in lieu thereof, subject to the conditions
set forth in this paragraph (i), by making
an irrevocable election to apply the provisions of either—
(i) This section, except that in applying
paragraph (c)(1) of this section, the amount
of loss disallowed under paragraph (a)(1)
of this section and the amount of basis reduction under paragraph (b)(1) of this section with respect to a share of stock will not
exceed the sum of the amounts described
in paragraphs (c)(1)(i) and (ii) of this section; or
(ii) Section 1.337(d)–2.
(3) Operating rules—(i) Reattribution of losses in the case of an election
to determine allowable loss by applying
the provisions described in paragraph
(i)(2)(i) of this section. If a consolidated
group elects to determine allowable loss by
applying the provisions described in paragraph (i)(2)(i) of this section, an election
described in paragraph (g) of this section
to reattribute losses will be respected only
if the requirements of paragraph (g) of this
section, including the requirement that the
election be filed with the group’s income
tax return for the year of the disposition,
have been or are satisfied. For example,
if a consolidated group did not file a valid
election described in paragraph (g) of this
section with its return for the year of the
disposition, this section does not authorize
the group that disposed of the stock to
make such an election with its return for
the year in which it elects to determine its
allowable stock loss under the provisions
described in paragraph (i)(2)(i) of this section. If a consolidated group that made a
valid election described in paragraph (g)
of this section with respect to the disposition of stock elects to determine allowable
loss by applying the provisions described
in paragraph (i)(2)(i) of this section, the
election described in paragraph (g) of
this section may not be revoked, and the
amount of loss treated as reattributed as of
the time of the disposition pursuant to the
election described in paragraph (g) of this
section is the amount of loss originally
reattributed, reduced to the extent that it
exceeds the greater of—
(A) The amount of stock loss disallowed after applying the provisions de-

781

scribed in paragraph (i)(2)(i) of this section; and
(B) The amount of reattributed losses
that the group that disposed of the stock
absorbed in years for which the assessment
of a deficiency is prevented by any law or
rule of law as of the date the election to apply the provisions described in paragraph
(i)(2)(i) of this section is filed and at all
times thereafter.
(ii) Reattribution of losses in the case of
an election to determine allowable loss by
applying the provisions described in paragraph (i)(2)(ii) of this section. If a consolidated group elects to determine allowable
loss by applying the provisions described
in paragraph (i)(2)(ii) of this section, the
consolidated group may not make an election described in paragraph (g) of this section to reattribute any losses. If the consolidated group made an election described in
paragraph (g) of this section with respect
to the disposition of subsidiary stock, the
amount of loss treated as reattributed pursuant to such election will be the greater
of—
(A) Zero; and
(B) The amount of reattributed losses
that the group that disposed of the stock
absorbed in years for which the assessment
of a deficiency is prevented by any law or
rule of law as of the date the election to apply the provisions described in paragraph
(i)(2)(ii) of this section is filed and at all
times thereafter.
(iii) Apportionment of section 382
limitation in the case of a reduction of
reattributed losses—(A) Losses subject
to a separate section 382 limitation. If,
as a result of the application of paragraph
(i)(3)(i) or (ii) and paragraph (i)(3)(vii) of
this section, pre-change separate attributes
that were subject to a separate section 382
limitation are treated as losses of a subsidiary and the common parent previously
elected to apportion all or a part of such
limitation to itself under §1.1502–96(d),
the common parent may reduce the amount
of such limitation apportioned to itself.
(B) Losses subject to a subgroup section 382 limitation. If, as a result of the
application of paragraph (i)(3)(i) or (ii)
and paragraph (i)(3)(vii) of this section,
pre-change subgroup attributes that were
subject to a subgroup section 382 limitation are treated as losses of a subsidiary
and the common parent previously elected
to apportion all or a part of such limi-

March 28, 2005

tation to itself under §1.1502–96(d), the
common parent may reduce the amount
of such limitation apportioned to itself.
In addition, if such subsidiary has ceased
to be a member of the loss subgroup to
which the pre-change subgroup attributes
relate, the common parent may increase
the total amount of such limitation apportioned to such subsidiary (or loss subgroup that includes such subsidiary) under §1.1502–95(c) by an amount not in excess of the amount by which such limitation that is apportioned to the common parent is reduced pursuant to the previous sentence.
(C) Losses subject to a consolidated
section 382 limitation. If, as a result of the
application of paragraph (i)(3)(i) or (ii)
and paragraph (i)(3)(vii) of this section,
pre-change consolidated attributes (or
pre-change subgroup attributes) that were
subject to a consolidated section 382 limitation (or subgroup section 382 limitation
where the common parent was a member
of the loss subgroup) are treated as losses
of a subsidiary, and the subsidiary has
ceased to be a member of the loss group (or
loss subgroup), the common parent may
increase the amount of such limitation that
is apportioned to such subsidiary (or loss
subgroup that includes such subsidiary)
under §1.1502–95(c). The amount of each
element of such limitation that can be apportioned to a subsidiary (or loss subgroup
that includes such subsidiary) pursuant to
this paragraph (i)(3)(iii)(C), however, cannot exceed the product of (x) the element
and (y) a fraction the numerator of which
is the amount of pre-change consolidated
attributes (or subgroup attributes) subject
to that limitation that are treated as losses
of the subsidiary (or loss subgroup) as
a result of the application of paragraph
(i)(3)(i) or (ii) and paragraph (i)(3)(vii) of
this section and the denominator of which
is the total amount of pre-change attributes
subject to that limitation determined as of
the close of the taxable year in which the
subsidiary ceases to be a member of the
group (or loss subgroup).
(D) Operating rules—(1) Limitations
on apportionment. In making any adjustment to an apportionment of a subgroup
section 382 limitation or a consolidated
section 382 limitation pursuant to paragraph (i)(3)(iii)(B) or (C) of this section,
the common parent must take into account
the extent, if any, to which such limita-

March 28, 2005

tion has previously been apportioned to another subsidiary or loss subgroup prior to
the date the election to apply the provisions
described in paragraph (i)(2)(i) or (ii) of
this section is filed.
(2) Manner and effect of adjustment
to previous apportionment of limitation to
common parent. Any reduction in a previous apportionment of a separate section
382 limitation or a subgroup section 382
limitation to the common parent made pursuant to paragraph (i)(3)(iii)(A) or (B) of
this section is treated as effective when
the previous apportionment was effective.
Any such adjustment must be made in a
manner consistent with the principles of
§1.1502–95(c). For example, to the extent
the apportionment of a separate section
382 limitation or a subgroup section 382
limitation to a common parent is reduced
pursuant to paragraph (i)(3)(iii)(A) or (B)
of this section, the amount of such limitation available to the subsidiary or loss subgroup, as applicable, is increased.
(3) Manner and effect of adjustment
to apportionment of limitation to departing subsidiary or loss subgroup. Any increase in an amount of a subgroup section 382 limitation or a consolidated section 382 limitation apportioned to a departing subsidiary (or loss subgroup that
includes such subsidiary) made pursuant
to paragraph (i)(3)(iii)(B) or (C) of this
section is treated as effective for taxable
years ending after the date the subsidiary
ceases to be a member of the group or
loss subgroup. Any such adjustment may
be made regardless of whether the common parent previously elected to apportion all or a part of such limitation to such
subsidiary (or loss subgroup that includes
such subsidiary) under §1.1502–95(c) or
1.1502–95A(c), but must be made in a
manner consistent with the principles of
§1.1502–95(c). For example, to the extent the apportionment of an element of a
subgroup section 382 limitation or a consolidated section 382 limitation to a departing subsidiary is increased pursuant to
paragraph (i)(3)(iii)(B) or (C) of this section, the amount of such element of such
limitation that is available to the loss subgroup or loss group is reduced consistent
with §1.1502–95(c)(3).
(4) Prohibition against other adjustments. This paragraph (i)(3)(iii) does not
authorize the common parent to adjust
the apportionment of any separate sec-

782

tion 382 limitation, subgroup section 382
limitation, or consolidated section 382
limitation that it previously apportioned to
a subsidiary, to a loss subgroup, or to itself
under §1.1502–95(c), 1.1502–95A(c), or
1.1502–96(d), other than as provided in
paragraphs (i)(3)(iii)(A), (B), and (C) of
this section.
(E) Time and manner of making apportionment adjustment. An adjustment to the
apportionment of any separate section 382
limitation, subgroup section 382 limitation, or consolidated section 382 limitation
pursuant to paragraph (i)(3)(iii)(A), (B), or
(C) of this section must be made as part of
the group’s election to apply the provisions
of paragraph (i)(2)(i) or (ii) of this section,
as described in paragraph (i)(4) of this section.
(iv) Notification of reduction of reattributed losses and adjustment of apportionment of section 382 limitation. If the
application of paragraph (i)(3)(i) or (ii) of
this section results in a reduction of the
losses treated as reattributed pursuant to
an election described in paragraph (g) of
this section, then, prior to the date that the
group files its income tax return for the taxable year that includes August 26, 2004,
the common parent must send the notification required by this paragraph to the subsidiary, at the subsidiary’s last known address. In addition, if the acquirer of the
subsidiary stock was a member of a consolidated group at the time of the disposition, the common parent must send a copy
of such notification to the person that was
the common parent of the acquirer’s group
at the time of the acquisition, at its last
known address. The notification is to be in
the form of a statement entitled Recomputation of Losses Reattributed Pursuant to
the Election Described in §1.1502–20(g),
that is signed by the common parent and
that includes the following information—
(A) The name and employer identification number (E.I.N.) of the subsidiary;
(B) The original and the recomputed
amount of losses treated as reattributed
pursuant to the election described in paragraph (g) of this section; and
(C) If the apportionment of a separate
section 382 limitation, a subgroup section
382 limitation, or a consolidated section
382 limitation is adjusted pursuant to paragraph (i)(3)(iii)(A), (B), or (C) of this section, the original and the adjusted apportionment of such limitation.

2005–13 I.R.B.

(v) Items taken into account in open
years—(A) General rule. An election under paragraph (i)(2) of this section affects
a taxpayer’s items of income, gain, deduction, or loss only to the extent that the
election gives rise, directly or indirectly,
to items or amounts that would properly
be taken into account in a year for which
an assessment of deficiency or a refund of
overpayment, as the case may be, is not
prevented by any law or rule of law. Under this paragraph, if the election increases
the loss allowed with respect to a disposition of subsidiary stock, but the year of
the disposition (or the year to which such
loss would have been carried back or carried forward) is a year for which a refund
of overpayment is prevented by law, to the
extent that the absorption of such excess
loss in such year would have affected the
tax treatment of another item (e.g., another
loss that was absorbed in such year) that
has an effect in a year for which a refund
of overpayment is not prevented by any
law or rule of law, the election will affect
the treatment of such other item. Therefore, if the absorption of the excess loss
in the year of the disposition (which is a
year for which a refund of overpayment is
prevented by law) would have prevented
the absorption of another loss (the second
loss) in such year and such loss would have
been carried to and used in a year for which
a refund of overpayment is not prevented
by any law or rule of law (the other year),
the election makes the second loss available for use in the other year.
(B) Special rule. If a member’s basis in stock of a subsidiary was reduced
pursuant to §1.1502–32 because a loss
with respect to stock of a lower-tier subsidiary was treated as disallowed under
this section, then, to the extent such disallowed loss is allowed as a result of an
election under paragraph (i) of this section
but would have been properly absorbed
or expired in a year for which a refund
of overpayment is prevented by law or
rule of law, the member’s basis in the
subsidiary stock may be increased for purposes of determining the group’s or the
shareholder-member’s Federal income tax
liability in all years for which a refund of
overpayment is not prevented by law or
rule of law.
(vi) Conforming amendments for items
previously taken into account in open
years. To the extent that, on any Federal

2005–13 I.R.B.

income tax return, the common parent
absorbed losses that were reattributed pursuant to an election described in paragraph
(g) of this section and the amount of losses
so absorbed is in excess of the amount of
losses that are treated as reattributed after
application of paragraph (i)(3)(i) or (ii)
of this section, or that may be taken into
account after any adjustment to an apportionment of a separate section 382 limitation, a subgroup section 382 limitation,
or a consolidated section 382 limitation
pursuant to paragraph (i)(3)(iii) of this
section, such returns must be amended to
the greatest extent possible to reflect the
reduction in the amount of losses treated
as reattributed and any adjustment to the
apportionment of such limitation.
(vii) Availability of losses to subsidiary.
To the extent that any losses of a subsidiary are reattributed to the common parent pursuant to an election described in
paragraph (g) of this section, such reattribution is binding on the subsidiary and
any group of which the subsidiary is or becomes a member. Therefore, if the subsidiary ceases to be a member of the group,
any reattributed losses are not thereafter
available to the subsidiary and may not
be utilized by the subsidiary or any other
group of which such subsidiary is or becomes a member. To the extent that the
application of paragraph (i)(3)(i) or (ii) of
this section results in a reduction in the
amount of losses treated as reattributed to
the common parent pursuant to an election
described in paragraph (g) of this section,
however, losses in the amount of such reduction are available to the subsidiary and
may be utilized by the subsidiary or any
group of which such subsidiary is a member, subject to applicable limitations (e.g.,
section 382).
(viii) Apportionment of section 382
limitation in the case of an amendment of an election made pursuant to
§1.1502–32(b)(4)—(A) In general. If, in
connection with a disposition or deconsolidation of subsidiary stock, the subsidiary
the stock of which was disposed of or deconsolidated became a member of another
consolidated group (the acquiring group),
and, pursuant to §1.1502–32(b)(4)(vii),
the acquiring group amends an election
made pursuant to §1.1502–32(b)(4) to
treat all or a portion of the loss carryovers
of such subsidiary (or a lower-tier corporation of such subsidiary) as expiring

783

for all Federal income tax purposes, then
the common parent may reapportion a
separate, subgroup, or consolidated section 382 limitation with respect to such
subsidiary or lower-tier corporation in a
manner consistent with the principles of
paragraphs (i)(3)(iii)(A) through (D) of
this section. Any reapportionment of a
section 382 limitation made pursuant to
the previous sentence shall have the effects
described in paragraphs (i)(3)(iii)(D)(ii)
and (iii) of this section. For purposes
of this section, a lower-tier corporation
is a corporation that was a member of
the group of which the subsidiary was a
member immediately before becoming a
member of the acquiring group and that
became a member of the acquiring group
as a result of the subsidiary becoming a
member of the acquiring group.
(B) Time and manner of adjustment
of apportionment of section 382 limitation. The common parent must include
a statement entitled Adjustment of Apportionment of Section 382 Limitation in
Connection with Amendment of Election
under §1.1502–32(b)(4) with or as part
of any timely filed (including any extensions) original return for a taxable year
that includes any date on or before August
26, 2004, or with or as part of an amended
return filed before the date the original
return for the taxable year that includes
August 26, 2004, is due (with regard to
extensions). The statement must set forth
the name and E.I.N. of the subsidiary and
both the original and the adjusted apportionment of a separate section 382 limitation, a subgroup section 382 limitation,
and a consolidated section 382 limitation,
as applicable. The requirements of this
paragraph (i)(3)(viii)(B) will be treated
as satisfied if the information required by
this paragraph (i)(3)(viii)(B) is included in
the statement required by paragraph (i)(4)
of this section rather than in a separate
statement.
(4) Time and manner of making the
election. An election to determine allowable loss or basis reduction by applying
the provisions described in paragraph
(i)(2)(i) or (ii) of this section is made by
including the statement required by this
paragraph with or as part of any timely
filed (including any extensions) original
return for a taxable year that includes
any date on or before August 26, 2004,
or with or as part of an amended return

March 28, 2005

filed before the date the original return for
the taxable year that includes August 26,
2004, is due (including any extensions).
Filing a statement in accordance with the
provisions of this paragraph satisfies the
requirement to file a “statement of allowed
loss” otherwise imposed under paragraph
(c)(3) of this section or §1.337(d)–2(c)(3).
The statement required by this paragraph
satisfies the requirement that a statement
be filed in order to claim allowable loss or
basis reduction by applying the provisions
described in paragraph (i)(2)(i) or (ii). The
statement filed under this paragraph shall
be entitled Allowed Loss under Section
[Specify Section under Which Allowed
Loss Is Determined] Pursuant to Section
1.1502–20(i) and must include the following information—
(i) The name and E.I.N. of the subsidiary and of the member(s) that disposed
of the subsidiary stock;
(ii) In the case of an election to determine allowable loss or basis reduction by
applying the provisions described in paragraph (i)(2)(i) of this section, a statement
that the taxpayer elects to determine allowable loss or basis reduction by applying
such provisions;
(iii) In the case of an election to determine allowable loss or basis reduction by
applying the provisions described in paragraph (i)(2)(ii) of this section, a statement
that the taxpayer elects to determine allowable loss or basis reduction by applying
such provisions;
(iv) If an election described in paragraph (g) of this section was made with
respect to the disposition of the stock of
the subsidiary, the amount of losses originally treated as reattributed pursuant to
such election and the amount of losses
treated as reattributed pursuant to paragraph (i)(3)(i) or (ii) of this section;
(v) If an apportionment of a separate
section 382 limitation, a subgroup section
382 limitation, or a consolidated section
382 limitation is adjusted pursuant to paragraph (i)(3)(iii)(A), (B), or (C) of this section, the original and redetermined apportionment of such limitation; and
(vi) If the application of paragraph
(i)(3)(i) or (ii) of this section results in a
reduction of the amount of losses treated
as reattributed pursuant to an election described in paragraph (g) of this section, a
statement that the notification described
in paragraph (i)(3)(iv) of this section was

March 28, 2005

sent to the subsidiary and, if the acquirer
was a member of a consolidated group at
the time of the stock sale, to the person
that was the common parent of such group
at such time, as required by paragraph
(i)(3)(iv) of this section.
(5) Revocation or amendment of prior
elections—(i) In general. Notwithstanding anything to the contrary in this
paragraph (i), if a consolidated group
made an election under §1.1502–20T(i)
to apply the provisions described in
§1.1502–20T(i)(2)(i) or (ii), the consolidated group may revoke or amend
that election as provided in this paragraph
(i)(5).
(ii) Time and manner of revoking
or amending an election. An election
to apply the provisions described in
§1.1502–20T(i)(2)(i) or (ii) is revoked
or amended by including the statement
required by paragraph (i)(5)(iii) of this
section with or as part of any timely filed
(including any extensions) original return
for a taxable year that includes any date
on or before August 26, 2004, or with or
as part of an amended return filed before
the date the original return for the taxable
year that includes August 26, 2004, is due
(including any extensions).
(iii) Required statement—(A) Revocation.
To revoke an election to
apply the provisions described in
§1.1502–20T(i)(2)(i) or (ii), the consolidated group must file a statement
entitled Revocation of Election Under
Section 1.1502–20T(i). The statement
must include the name and E.I.N. of the
subsidiary and of the member(s) that disposed of the subsidiary stock.
(B) Amendment. To amend an election to apply the provisions described in
§1.1502–20T(i)(2)(i) or (ii), the consolidated group must file a statement entitled Amendment of Election Under Section 1.1502–20T(i). The statement must
include the following information—
(1) The name and E.I.N. of the subsidiary and of the member(s) that disposed
of the subsidiary stock; and
(2) The provision the taxpayer elects to
apply to determine allowable loss or basis
reduction (described in paragraph (i)(2)(i)
or (ii) of this section).
(iv) Special rule. If a consolidated
group revokes an election made under
§1.1502–20T(i), an election described in
paragraph (g) of this section to reattribute

784

losses will not be respected, even if such
election was filed with the group’s return
for the year of the disposition.
(6) Effective date. This paragraph (i) is
applicable on and after March 3, 2005.
(7) Cross references. See §1.1502–
32(b)(4)(v) for a special rule for filing a
waiver of loss carryovers.
§1.1502–20T(i) [Removed]
Par. 5. In §1.1502–20T, paragraph (i)
is removed.
Par. 6. Section 1.1502–32 is amended
by revising paragraphs (b)(4)(v) and
(b)(4)(vii) to read as follows:
§1.1502–32 Investment adjustments.
*****
(b) * * *
(4) * * *
(v) Special rule for loss carryovers of
a subsidiary acquired in a transaction for
which an election under §1.1502–20(i)(2)
is made—(A) Expired losses. Notwithstanding paragraph (b)(4)(iv) of this section, unless a group otherwise chooses,
to the extent that S’s loss carryovers are
increased by reason of an election under
§1.1502–20(i)(2) and such loss carryovers
expire or would have been properly used to
offset income in a taxable year for which
the refund of an overpayment is prevented
by any law or rule of law as of the date
the group files its original return for the
taxable year in which S receives the notification described in §1.1502–20(i)(3)(iv)
and at all times thereafter, the group will
be deemed to have made an election under
paragraph (b)(4) of this section to treat all
of such loss carryovers as expiring for all
Federal income tax purposes immediately
before S became a member of the consolidated group. A group may choose not to
apply the rule of the previous sentence to
all of such loss carryovers of S by taking a
position on an original or amended tax return for each relevant taxable year that is
consistent with having made such choice.
(B) Available losses. Notwithstanding paragraph (b)(4)(iv) of this section,
to the extent that S’s loss carryovers are
increased by reason of an election under
§1.1502–20(i)(2) and such loss carryovers
have not expired and would not have
been properly used to offset income in
a taxable year for which the refund of
an overpayment is prevented by any law

2005–13 I.R.B.

or rule of law as of the date the group
files its original return for the taxable
year in which S receives the notification
described in §1.1502–20(i)(3)(iv) and at
all times thereafter, the group may make
an election under paragraph (b)(4) of this
section to treat all or a portion of such
loss carryovers as expiring for all Federal
income tax purposes immediately before
S became a member of the consolidated
group. Such election must be filed with
the group’s original return for the taxable
year in which S receives the notification
described in §1.1502–20(i)(3)(iv).
(C) Effective dates. Paragraph (b)(4)(v)
of this section is applicable on and after
March 3, 2005. For prior periods, see
§1.1502–32T(b)(4)(v) as contained in the
26 CFR part 1 in effect on March 2, 2005.
(vi) * * *
(vii) Special rules for amending waiver
of loss carryovers from separate return
limitation year—(A) Waivers that increased allowable loss or reduced basis
reduction required. If, in connection with
the acquisition of S, the group made an
election pursuant to paragraph (b)(4) of
this section to treat all or any portion
of S’s loss carryovers as expiring, and
the prior group elected to determine the
amount of the allowable loss or the basis reduction required with respect to the
stock of S or a higher-tier corporation of
S by applying the provisions described in
§1.1502–20(i)(2)(i) or (ii), then the group
may reduce the amount of any loss carryover deemed to expire (or increase the
amount of any loss carryover deemed not
to expire) as a result of the election made
pursuant to paragraph (b)(4) of this section. The aggregate amount of loss carryovers that may be treated as not expiring as
a result of amendments made pursuant to
this paragraph (b)(4)(vii)(A) with respect
to S and any higher- and lower-tier corporation of S may not exceed the amount
described in §1.1502–20(c)(1)(iii) with
respect to the acquired stock (computed
without regard to the effect of the group’s
election or elections pursuant to paragraph
(b)(4) of this section, but with regard to
the effect of the prior group’s election
pursuant to §1.1502–20(g), if any, prior
to the application of §1.1502–20(i)(3)).
For purposes of determining the aggregate amount of loss carryovers that may
be treated as not expiring as a result of
amendments made pursuant to this para-

2005–13 I.R.B.

graph (b)(4)(vii)(A) with respect to S and
any higher- and lower-tier corporation of
S, the group may rely on a written notification provided by the prior group. Nothing
in this paragraph shall be construed as
permitting a group to increase the amount
of any loss carryover deemed to expire (or
reduce the amount of any loss carryover
deemed not to expire) as a result of the
election made pursuant to paragraph (b)(4)
of this section.
(B) Inadvertent waivers of loss carryovers previously subject to an election
described in §1.1502–20(g). If, in connection with the acquisition of S, the group
made an election pursuant to paragraph
(b)(4) of this section to waive loss carryovers of S by identifying the amount of
each loss carryover deemed not to expire,
the prior group elected to determine the
amount of the allowable loss or the basis reduction required with respect to the
stock of S or a higher-tier corporation of
S by applying the provisions described
in §1.1502–20(i)(2)(i) or (ii), and the
amount of S’s loss carryovers treated as
reattributed to the prior group pursuant to
the election described in §1.1502–20(g)
is reduced pursuant to §1.1502–20(i)(3),
then the group may amend its election
made pursuant to paragraph (b)(4) of this
section to provide that all or a portion of
the loss carryovers of S that are treated as
loss carryovers of S as a result of the prior
group’s election to apply the provisions
described in §1.1502–20(i)(2)(i) or (ii)
are deemed not to expire. This paragraph
(b)(4)(vii)(B), however, does not permit
a group to reduce the amount of any loss
carryover deemed not to expire as a result
of the election made pursuant to paragraph
(b)(4) of this section.
(C) Time and manner of amending an
election under §1.1502–32(b)(4). The
amendment of an election made pursuant
to paragraph (b)(4) of this section must be
made in a statement entitled Amendment
of Election to Treat Loss Carryover as Expiring Under §1.1502–32(b)(4) Pursuant
to §1.1502–32(b)(4)(vii). The statement
must be filed with or as part of any timely
filed (including extensions) original return
for the taxable year that includes August
26, 2004, or with or as part of an amended
return filed before the date the original
return for the taxable year that includes
August 26, 2004, is due (with regard to
extensions). A separate statement shall

785

be filed for each election made pursuant
to paragraph (b)(4) of this section that
is being amended pursuant to this paragraph (b)(4)(vii). For purposes of making
this statement, the group may rely on the
statements set forth in a written notification provided by the prior group. The
statement filed under this paragraph must
include the following—
(1) The name and employer identification number (E.I.N.) of S;
(2) In the case of an amendment made
pursuant to paragraph (b)(4)(vii)(A), a
statement that the group has received a
written notification from the prior group
confirming that the group’s prior election
or elections pursuant to paragraph (b)(4)
of this section had the effect of either increasing the prior group’s allowable loss
on the disposition of subsidiary stock or
reducing the prior group’s amount of basis
reduction required;
(3) The amount of each loss carryover
of S deemed to expire (or the amount of
loss carryover deemed not to expire) as
set forth in the election made pursuant to
paragraph (b)(4) of this section;
(4) The amended amount of each loss
carryover of S deemed to expire (or the
amended amount of loss carryover deemed
not to expire); and
(5) In the case of an amendment made
pursuant to paragraph (b)(4)(vii)(A) of
this section, a statement that the aggregate
amount of loss carryovers of S and any
higher- and lower-tier corporation of S
that will be treated as not expiring as a
result of amendments made pursuant to
paragraph (b)(4)(vii)(A) of this section
will not exceed the amount described in
§1.1502–20(c)(1)(iii) with respect to the
acquired stock (computed without regard
to the effect of the group’s election or
elections pursuant to paragraph (b)(4) of
this section, but with regard to the effect
of the prior group’s election pursuant to
§1.1502–20(g), if any, prior to the application of §1.1502–20(i)(3)).
(D) Items taken into account in open
years. An amendment to an election made
pursuant to paragraph (b)(4) of this section
affects the group’s items of income, gain,
deduction, or loss only to the extent that
the amendment gives rise, directly or indirectly, to items or amounts that would
properly be taken into account in a year
for which an assessment of deficiency or
a refund for overpayment, as the case may

March 28, 2005

be, is not prevented by any law or rule
of law. Under this paragraph, if the year
to which a loss previously deemed to expire as a result of an election made pursuant to paragraph (b)(4) of this section
is deemed not to expire as a result of an
election made pursuant to this paragraph
would have been carried back or carried
forward is a year for which a refund of
overpayment is prevented by law, then to
the extent that the absorption of such loss
in such year would have affected the tax
treatment of another item (e.g., another
loss that was absorbed in such year) that
has an effect in a year for which a refund
of overpayment is not prevented by any
law or rule of law, the amendment to the
election made pursuant to paragraph (b)(4)
of this section will affect the treatment of
such other item. Therefore, if the absorption of such loss (the first loss) in a year
for which a refund of overpayment is prevented by law would have prevented the
absorption of another loss (the second loss)

in such year and such second loss would
have been carried to and used in a year
for which a refund of overpayment is not
prevented by any law or rule of law (the
other year), the amendment of the election
makes the second loss available for use in
the other year.
(E) Higher- and lower-tier corporations of S. A higher-tier corporation of
S is a corporation that was a member of
the prior group and, as a result of such
higher-tier corporation becoming a member of the group; S became a member of
the group. A lower-tier corporation of S
is a corporation that was a member of the
prior group and became a member of the
group as a result of S becoming a member
of the group.
(F) Effective date. This paragraph
(b)(4)(vii) is applicable on and after
March 3, 2005. For prior periods, see
§1.1502–32T(b)(4)(vii) as contained in
the 26 CFR part 1 in effect on March 2,
2005.

Section

*****
Par. 7. In §1.1502–32T, paragraphs
(b)(4)(v) and (b)(4)(vii) are revised to read
as follows:
§1.1502–32T Investment adjustments
(temporary).
*****
(b) * * *
(4) * * *
(v) For further
§1.1502–32(b)(4)(v).
(vi) * * *
(vii) For further
§1.1502–32(b)(4)(vii).

Remove
§1.337(d)–2

§1.597–4(g)(2)(v)

§1.337(d)–2T

§1.337(d)–2

§1.1502–11(b)(3)(ii)(c)

§1.337(d)–2T

§1.337(d)–2

§1.1502–12(r)

§1.337(d)–2T

§1.337(d)–2

§1.1502–15(b)(2)(iii)

§1.337(d)–2T

§1.337(d)–2

§1.1502–35T(b)(6)(ii)

§1.337(d)–2T

§1.337(d)–2

§1.1502–35T(c)(9)

§1.337(d)–2T

§1.337(d)–2

§1.1502–91(h)(2)

§1.337(d)–2T

§1.337(d)–2

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

March 28, 2005

786

guidance

see

Add

§1.337(d)–2T

Authority: 26 U.S.C. 7805.
Par. 10. In §602.101, paragraph (b)
is amended by removing the entry for
§1.337(d)–2T and adding entries to the
table in numerical order to read, in part, as
follows:

see

*****
Par. 8. The following sections in
the table below are amended by revising
“§1.337(d)–2T” to “§1.337(d)–2,” each
time it appears in the paragraph:

§1.267(f)–1(k)

602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT

guidance

§602.101 OMB Control numbers.
*****
(b) * * *

2005–13 I.R.B.

CFR part or section where
identified and described

Current OMB
control No.

*****
1.337(d)–2

...........................................................

1545–1160
1545–1774

...........................................................

1545–1160
1545–1218
1545–1774

...........................................................

1545–1344
1545–1774

*****
1.1502–20

*****
1.1502–32
*****
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.

Section 472.—Last-in,
First-out Inventories
26 CFR 1.472–1: Last-in, first-out inventories.

Approved February 18, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on March 2, 2005,
8:45 a.m., and published in the issue of the Federal Register
for March 3, 2005, 70 F.R. 10319)

Section 470.—Limitation
on Deductions Allocable
to Property Used by
Governments or Other
Tax-Exempt Entities
Transition relief under § 470 is provided to certain
partnerships and pass-thru entities. See Notice 200529, page 796.

LIFO; price indexes; department
stores. The January 2005 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, 2005.

Rev. Rul. 2005–22

propriate application 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, 2005.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of departments, (b) three special combinations of
the major groups — soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, except for the following: candy, food, liquor,
tobacco, and contract departments.

The following Department Store Inventory Price Indexes for January 2005 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 ap-

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)

Groups
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Jan. 2004

Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women’s Underwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . .
Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005–13 I.R.B.

787

468.0
543.5
599.6
849.6
578.1
504.8
350.5
544.8
335.6
530.7

Jan. 2005
494.0
536.5
643.3
840.6
578.4
515.2
338.9
560.4
333.3
534.9

Percent Change
from Jan. 2004
to Jan. 20051
5.6
-1.3
7.3
-1.1
0.1
2.1
-3.3
2.9
-0.7
0.8

March 28, 2005