KPMG PPT - Tax Executives Institute, Inc.

Section 267(f) – Background
P
P
Unrelated Party
100%
(Loss stock)
70%
30%
S
S
► P sells 30 percent of S stock (at a loss) to Unrelated Party. P
recognizes and takes into account the loss on the sold stock.
► S liquidates. Section 331 applies to the liquidation (i.e., P
recognizes and takes into account the loss on its remaining 70
percent of S stock).
► See Granite Trust Co. v. United States, 238 F.2d 670 (1 st Cir. 1956); Commissioner v.
Day & Zimmerman, Inc. 151 F.2d 517 (3 rd Cir. 1945).
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