§ 1.1502-35T - Transfers of subsidiary stock and deconsolidations of subsidiaries (temporary).

(a) through (c)(3) [Reserved]. For further guidance, see § 1.1502-35(a) through (c)(3).

(4) Reduction of suspended loss— (i) General rule. The amount of any loss suspended pursuant to paragraphs (c)(1) and (c)(2) of § 1.1502-35 shall be reduced, but not below zero, by the subsidiary's (and any successor's) items of deduction and loss, and the subsidiary's (and any successor's) allocable share of items of deduction and loss of all lower-tier subsidiaries, that are allocable to the period beginning on the date of the disposition that gave rise to the suspended loss and ending on the day before the first date on which the subsidiary (and any successor) is not a member of the group of which it was a member immediately prior to the disposition (or any successor group), and that are taken into account in determining consolidated taxable income (or loss) of such group for any taxable year that includes any date on or after the date of the disposition and before the first date on which the subsidiary (and 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 determining the basis adjustments made under § 1.1502-32 to stock of the subsidiary (or any successor) owned by members of the group. The preceding sentence shall not apply to items of deduction and loss to the extent that the group can establish that all or a portion of such items was not reflected in the computation of the duplicated loss with respect to the subsidiary on the date of the disposition of stock that gave rise to the suspended loss.

(c)(4)(ii) through (g)(2) [Reserved]. For further guidance, see § 1.1502-35(c)(4)(ii) through (g)(2).

(3) Anti-loss reimportation rule—(i) Conditions for application. This paragraph (g)(3) applies when—

(A) A member of a group (the selling group) recognized and was allowed a loss with respect to a share of stock of S, a subsidiary or former subsidiary of the selling group;

(B) That stock loss was duplicated (in whole or in part) in S's attributes (duplicating items) at the earlier of the time that the loss was recognized or that S ceased to be a member; and

(C) Within ten years of the date that S ceased to be a member, there is a reimportation event. For this purpose, a reimportation event is any event after which a duplicating item is a reimported item. A reimported item is any duplicating item that is reflected in the attributes of any member of the selling group, including S, or, if not reflected in the attributes, would be properly taken into account by any member of the selling group (for example as the result of a carryback) (a reimported item).

(ii) Effect of application. Immediately before the time that a reimported item (or any portion of a reimported item) would be properly taken into account (but for the application of this paragraph (g)(3)), such item (or such portion of the item) is reduced to zero and no deduction or loss is allowed, directly or indirectly, with respect to that item.

(iii) Operating rules. For purposes of this paragraph (g)(3)—

(A) The terms member, subsidiary, and group include their predecessors and successors to the extent necessary to effectuate the purposes of this section;

(B) The determination of whether a loss is duplicative is made under the principles of paragraph (d)(4) of this section; and

(C) The reduction of a reimported item (other than duplicating items that are carried back to a consolidated return year of the selling group) is a noncapital, nondeductible expense within the meaning of § 1.1502-32(b)(3)(iii).

(g)(4) through (g)(5) [Reserved]. For further guidance, see § 1.1502-35(g)(4) through (g)(5).

(6) General anti-avoidance rule applicable on or after April 10, 2007. If a taxpayer acts with a view to avoid the purposes of this section, appropriate adjustments will be made to carry out the purposes of this section.

(h) Application of other rules of law. See § 1.1502-80(a) regarding the general applicability of other rules of law.

(i) [Reserved]. For further guidance, see § 1.1502-35(i).

(j)(1) [Reserved]. For further guidance, see § 1.1502-35(j)(1).

(2) Transactions after April 10, 2007—(i) Effective date. Paragraph (g)(3) of this section applies to reimported items if the related stock loss is recognized on or after April 10, 2007. Paragraph (g)(3) (other than paragraph (g)(3)(i)(A)) of this section also applies with respect to the duplication of subsidiary stock loss recognized in dispositions (described in § 1.1502-35(g)(3)(i)(A), as contained in 26 CFR part 1, revised as of January 1, 2007) on or after March 7, 2002, if the reimportation event with respect to that loss occurs on or after April 10, 2007. For rules applicable to losses reimported before April 10, 2007, see § 1.1502-35(g)(3), as contained in 26 CFR part 1 in effect on January 1, 2007. Paragraphs (g)(6) and (h) of this section apply on or after April 10, 2007. For rules applicable prior to April 10, 2007, see § 1.1502-35 as contained in 26 CFR part 1 in effect on January 1, 2007.

(ii) Expiration date. The applicability of paragraphs (g)(3), (g)(6), and (h) of this section will expire on April 9, 2010.

(k) Effective date—(1) Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006.

(2) Expiration date. The applicability of this section will expire on May 26, 2009.