Announcement 2010-18

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Internal Revenue Bulletin:

2010-12 March 22, 2010

Announcement 2010-18

Unified Rule for Loss on Subsidiary Stock; Correction



Internal Revenue Service (IRS), Treasury.


Correcting amendment.


This document contains a correction to final regulations (T.D. 9424, 2008-44 I.R.B. 1012) that were published in the Federal Register on Wednesday, September 17, 2008 (73 FR 53934). The regulations apply to corporations filing consolidated returns, and corporations that enter into certain tax-free reorganizations. The regulations provide rules for determining the tax consequences of a member’s transfer (including by deconsolidation and worthlessness) of loss shares of subsidiary stock.


Effective Date: This correction is effective on March 5, 2010, and is applicable on September 17, 2008.


Maury Passman, (202) 622-7550 or Theresa Abell, (202) 622-7700 (not toll-free numbers).



The final regulations (T.D. 9424) that are the subject of this document are under sections 337, 358, 362 and 1502 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (T.D. 9424) contain an error that may prove to be misleading and is in need of clarification. The final regulations revised §1.1502-35(a) to provide that, in general, §1.1502-35 would only apply to transactions completed prior to September 17, 2008. The final regulations also revised the operative rules in §1.1502-35. However, the effective date prescribed in §1.1502-35(j) appeared to preclude the application of the revised §1.1502-35 to transactions completed prior to September 17, 2008. The final regulations are clarified to provide that the revised rules in §1.1502-35 (including the ten-year termination of application of §1.1502-35 described in Background section 2.A. of the preamble) apply after September 16, 2008, to all transactions subject to that section.

* * * * *

Correction of Publication

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendment:


Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.1502-35 is amended by revising the first sentence of paragraph (j) to read as follows:

§1.1502-35 Transfers of subsidiary stock and

deconsolidations of subsidiaries. * * * * *

(j) Effective/applicability dates. This section applies after September 16, 2008. * * *

* * * * *

LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).


(Filed by the Office of the Federal Register on March 4, 2010, 8:45 a.m., and published in the issue of the Federal Register for March 5, 2010, 75 F.R. 10172)

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