Overview
Tax Notes quoted Steptoe tax partner Lisa Zarlenga in an article titled “Practitioners Troubled by Court Disallowing Double Deductions.” The article, published July 3, discusses the 2-1 decision by the US Court of Appeals for the Third Circuit in Duquesne Light Holdings Inc. & Subsidiaries v. Commissioner, which affirmed the Tax Court’s decision to apply the Ilfeld doctrine and disallow 199 million of the consolidated group’s double deductions for the same economic loss concerning the dispositions of the subsidiary’s stock and the subsidiary’s assets. Some believe this decision could cause havoc in what is a highly technical and complex area of tax law.
Ms. Zarlenga tells Tax Notes that the court applied a “very stringent standard to Ilfeld that would be difficult in most cases to get around.” With today’s rules under reg. section 1.1502-36 — a “very mechanical approach” for determining allowable double deductions — taxpayers would still have to overlay Ilfeld. But based on the dissent’s more reasonable approach, the existing regulations “fairly may be read” to authorize double deduction of losses.
The full article can be read at Tax Notes (subscription required).
