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