tion 117, be considered as a net operating loss or a net capital loss, as the case may be, separately sustained by such corporation and subject to the provisions of paragraph (b) (2) (iii) (c) and (d) or paragraph (b) (2) (ix) (b) of this section, and

(vii) In the case of a corporation which became a member of the affiliated group subsequent to March 14, 1941, common parent corporation or subsidiary, as the case may be, allowable deductions shall be determined subject to the qualifications prescribed in subparagraph (11) of this paragraph.

CODIFICATION: § 23.31 (a) (1) was amended as follows, by Treasury Decision 5340, Mar. 14, 1944, 9 F.R. 2843: The word "and" at the end of subdivision (iv) was deleted, a comma was substituted for the period at the end of subdivision (v), the word "and" was added, and a new subdivision (vi), reading as set forth above, was added.

§ 23.31 (d) (1) was further amended as follows, by Treasury Decision 5341, Mar. 14, 1944, 9 F.R. 2844: The word "and" at the end of subdivision (v) was deleted, a comma was substituted for the period at the end of subdivision (vi), the word "and" was added, and a new subdivision (vii), reading as set forth above, was added.

(2) (iii)

(d) In the case of a corporation which became a member of the affiliated group subsequent to March 14, 1941, common parent corporatior or subsidiary, as the case may be, capital losses to the extent disallowed pursuant to the provisions of subparagraph (11) of this paragraph;

(ix) In the case of a corporation which became a member of the affiliated group subsequent to March 14, 1941, common parent corporation or subsidiary, as the case may be, gains and losses from involuntary conversions and from sales or exchanges of property subject to the provisions of section 117 (j) shall be determined subject to the qualifications prescribed in subparagraph (11) of this paragraph.

CODIFICATION: § 23.31 (d) (2) was amended as follows, by Treasury Decision 5341, Mar. 14, 1944, 9 F.R. 2844:

1. The word "and" at the end of subdivision (iii) (b) was deleted, a comma was substituted for the semicolon at the end of (iii) (c), the word "and" was added, and a new inferior subdivision (d), reading as set forth above, was added.

2. The word "and" at the end of subdivision (vii) was deleted, a semicolon was substituted for the period at the end of subdivision (viii), the word "and" was added, and a new subdivision (ix), reading as set forth above, was added.

(10) In no case shall there be included in the computation of the consolidated net capital gain for the taxable year as a consolidated net capital loss carry-over under (b) (2) (ix) (b) of this section (relating to net capital losses sustained by a corporation in years prior to the first taxable year in respect of which its income is included in the consolidated return) an amount exceeding in the aggregate the net capital gains of such corporation (determined without regard to any net capital loss carry-over) included in the computation of the consolidated net capital gain for the taxable year. [Subparagraph (10) added by T.D. 5341, Mar. 14, 1944, 9 F.R. 2844]

(11) In the case of an affiliated group formed at any time subsequent to March 14, 1941, or having among its members in the taxable year one or more subsidiaries which became members of the group subsequent to March 14, 1941, the consolidated net income for the taxable year, and for prior and subsequent taxable years to the extent affected by carrybacks and carry-overs from the taxable year, shall be determined subject to the following qualifications:

(i) There shall be excluded in the case of the common parent corporation and in the case of any subsidiaries which were members of the group on March 14, 1941, those deductions from gross income otherwise allowable with respect to:

(a) Sales or exchanges of capital assets,

(b) Involuntary conversions and sales or exchanges of property subject to the provisions of section 117 (j),

(c) Securities subject to the provisions of section 23 (g) (4) or sections 23 (k) (5), or

(d) Debts subject to the provisions of section 23 (k) (1).

to the extent that such deductions otherwise allowable exceed in the aggregate:

(1) In the case of capital losses, the excess of the aggregate capital gains over the aggregate capital losses of such corporations for the taxable year, or

(2) In the case of ordinary losses, the aggregate of the ordinary net income of such corporations for the taxable year,

increased in an amount equal to any excess of aggregate capital gains over aggregate capital losses of such corporations,

such capital gains and losses and such ordinary net income being determined pursuant to the provisions of these regulations but without regard to the provisions (d) (1) (iv) and (d) (2) (iii) (b) of this section and without regard to the losses in question;

(ii) There shall be excluded in the case of a subsidiary corporation which became a member of the affiliated group subsequent to March 14, 1941, those deductions from gross income otherwise allowable with respect to:

(a) Sales or exchanges of capital assets,

(b) Involuntary conversions and sales or exchanges of property subject to the provisions of section 117 (j),

(c) Securities subject to the provisions of section 23 (g) (4) or section 23 (k) (5), or

(d) Debts subject to the provisions of section 23 (k) (1), to the extent that such deductions otherwise allowable are attributable to events preceding the date upon which such corporation became a member of the group, and

(1) Being capital losses, exceed:

(i) The capital gains reduced by all other capital losses of such corporation for the taxable year, in the case in which such corporation was not, on March 14, 1941, a member of an affiliated group within the meaning of section 141, or

(ii) In case such corporation was a. member of an affiliated group on March 14, 1941, an amount which, together with like losses computed subject to the provisions of these regulations in the case of other members of the group during the taxable year which were affiliated with such corporation on March 14, 1941, within the meaning of section 141, is equal to the aggregate capital gains reduced by the aggregate of all other capital losses of such corporation and of such other members of the group, or

(2) Being ordinary losses, exceed:

(i) The ordinary net income of such corporation for the taxable year increased in an amount equal to any excess of capital gains over capital losses for the taxable year, in the case in which such corporation was not, on March 14,

1941, a member of an affiliated group within the meaning of section 141, or

(ii) In case such corporation was a member of an affiliated group on March 14, 1941, an amount which, together with like losses computed subject to the provisions of these regulations in the case of other members of the group during the taxable year which were affiliated with such corporation on March 14, 1941, within the meaning of section 141, is equal to the ordinary net income of such corporation for the taxable year increased by the aggregate of the ordinary net income and decreased by the aggregate of the ordinary net losses of other members of the affiliated group during the taxable year which were affiliated with such corporation on March 14, 1941, within the meaning of section 141, and increased further in an amount equal to any excess of aggregate capital gains over aggregate capital losses of such corporations,

such capital gains and losses, and ordinary net income and net losses, as the case may be, being determined pursuant to the provisions of these regulations but without regard to the provisions of paragraphs (d) (1) (iv) and (d) (2) (iii) (b) of this section and without regard to the losses in question;

(iii) The portion of any loss otherwise allowable as a deduction for the taxable year which is disallowed pursuant to the provisions of (i) and (ii) shall, to the extent that it constitutes a net capital loss within the provisions of section 117 or a net operating loss within the provisions of section 122, be considered as a net capital loss or a net operating loss, as the case may be, in respect of those members of the group by reference to which the amount of the deduction disallowed under (i) and (ii) was determined, originating, for the purpose of the carry-back provisions, in a taxable year subsequent to the last taxable year in respect of which their income was included in a consolidated return, and, for the purpose of the carry-over provisions, in a taxable year prior to the first taxable year in respect of which their income was included in a consolidated return;

(iv) The provisions of subdivisions (i) and (ii) shall not apply with respect to the common parent corporation of an affiliated group formed subsequent to March 14, 1941, or to the common parent corporation or subsidiaries of a group in existence on March 14, 1941, acquiring

new members subsequent to March 14, 1941, or with respect to subsidiaries becoming members of the group subsequent to March 14, 1941:

(a) If the group consists solely of the common parent corporation and one or more subsidiaries created, directly or indirectly, by the common parent corporation or by other members of the group;

(b) If, immediately after the corporation involved became a member of the group, common parent corporation or subsidiary, as the case may be, stock possessing at least 95 percent of the voting power of all classes of its stock then outtanding and at least 95 percent of each class of its nonvoting stock then outstanding is owned, directly or indirectly, by substantially the same interests by which such stock was owned on March 14, 1941;

(c) If the affiliated group involved was formed, or the new subsidiary became a member of the group, as an incident to an involuntary conversion or to a transfer made pursuant to an order of the Securities and Exchange Commission, the Federal Communications Commission, the Interstate Commerce Commission, or a similar regulatory body of State or Federal Government; or

(d) To the extent to which, upon consideration of the facts or circumstances presented by the particular case, the Commissioner determines that a consolidated net income computed with respect to the affiliated group but without regard to those subdivisions will not serve to distort the income tax liability of the group [Subparaor of any of its members. graph (11) added by T.D. 5341, Mar. 14, 1944, 9 F.R. 2844; amended by T.D. 5397, Aug. 11, 1944, 9 F.R. 9883, 10245]

29.23(a)-15

29.23 (c) -2

29.23 (g)-2

29.23 (k)-1 29.23 (k)-3

29.23 (k)-4

29.23 (m)-1

29.23 (m)-3

Mustering-out payments of military and naval forces. [Added]

Valuation of inventories. [Amended]

Inventories of livestock raisers and other farmers. [Amended]

Inventories under elective method. [Amended] Involuntary liquidation and replacement. [Amended]

Alimony and separate maintenance payments; income to former wife. [Amended]

Services of child. [Added]

Adjusted gross income.

[Added]

Nontrade or nonbusiness
expenses. [Amended]
Federal duties and excise
taxes. [Revised]
Loss on stock of affiliate.
[Amended]

Bad debts. [Amended] Uncollectible deficiency upon sale of mortgaged or pledged property. [Amended]

Worthless bonds and similar obligations. [Amended]

Depletion of mines, oil and gas wells, other natural deposits, and timber; depreciation of improvements. [Amended] Computation of depletion of mines (other than metal, coal, fluorspar, ball and sagger clay, rock asphalt, flake graphite, vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, or barite mines, or potash or sulphur mines or deposits) on basis of discovery value. [Amended]

Computation of depletion based on percentage of income in case of coal mines, metal mines, fluorspar mines, flake graphite mines, vermiculite mines, beryl mines, feldspar mines, mica mines, talc mines, lepidolite mines, spodumene mines, barite mines, ball and sagger clay mines, rock asphalt mines, and potash and sulphur mines or deposits. [Amended] Depletion; adjustments of accounts based on bonuses or advanced royalty. [Amended] Statement to be attached to return when depletion is claimed on percentage basis. [Amended] Discovery of mines other than coal, metal, fluorspar, ball and sagger clay, rock asphalt, flake graphite, vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, and barite mines, and sulphur and potash mines or deposits. [Amended]

Computation of allowance for depletion of timber for given year. [Amended] Contributions or gifts by individuals. [Amended] Contributions of an employer toward the purchase of retirement annuities (section 23 (p) (1) (B)). [Amended] Contributions or gifts by corporations. [Amend

29.51-1

29.51-2

29.51-3

29.53-1

ed]

29.54-1

29.56-1

29.58-1

Credits

of individuals

When included in gross income. Amended]

Gain or loss upon disposition of installment ob

ligations.

[Amended]

Determination of the net taxable net income of a controlled

| Amended]

taxpayer.

Time for filing returns.
[Amended]

Records and income tax
forms. [Amended]
Date on which tax shall be
paid. [Amended]

ESTIMATED TAX 1

Declarations of estimated tax; taxable year beginning prior to January 1, 1945.

Declarations of estimated tax; taxable years beginning after December 31, 1944.

1 § 29.58-1 was amended, a new § 29.58-2 was added, former §§ 29.58-2 to 29.58-5, inclusive, were redesignated §§ 29.58-3 to 29.58-6, inclusive, a new § 29.58-7 was added, former §§ 29.58-6 to 29.58-8, inclusive, were redesignated §§ 29.58-8 to 29.58-10, inclusive, and a new § 29.58-11 was added.

Joint declarations by husband and wife.

29.112(c) 1

Receipt of other property or

money in tax-free exchange not connected with corporate reorganization. [Amended] Nonrecognition of loss. [Amended]

Purpose and scope of exception of reorganization exchanges. [Amended]

Exchanges in reorganization for stock or securities and other property or money. [Amended] Assumption of liabilities not to be taken into account for purpose of recognizing gain or loss. [Amended]

Exchange in connection with reorganization of insolvent corporation. [Added]

Recognition of gain or loss upon exchange in taxable year beginning prior to January 1, 1943. [Added]

Records to be kept and information to be filed. [Added]

Gain from sale or exchange to effectuate policies of Federal Communications Commission. [Added] Nature and effect of election. [Added]

Reduction of basis of property pursuant to election under section 112(m). [Added]

Manner of election. [Add

Property acquired by corporation in reorganization after December 31, 1917. [Amended]

29.113 (a) (14)-1 Property acquired prior to

March 1, 1913. [Amend

ed]

29.113 (a) (18)-1 Basis of property received in certain corporate liquidations. [Amended]