Tax planning with respect to an insolvent subsidiary in a consolidated return group: Part III

In the first column in this series on insolvent subsidiaries in a consolidatedreturn context, we explored the deemed satisfaction and reissuance rulefor transactions in intercompany obligations. In the second column welooked at the implications of cancellation of non-intercompany indebtednesson the insolvent subsidiary’s attributes and on the tax basis of the insolventsubsidiary’s stock. We also looked at the timing of a worthless stock loss andthe tax treatment of an excess loss account (ELA). We will now begin to look atthe consolidated return rules that limit or influence the amount of loss whichcan be claimed (or the income which must be recognized) with respect toin the insolvent subsidiary. In column, intricatecircular basis regulations. 

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