26 U.S. Code § 267 - Losses, expenses, and interest with respect to transactions between related taxpayers

Source

(Aug. 16, 1954, ch. 736, 68A Stat. 78; Pub. L. 95–628, § 2(a),Nov. 10, 1978, 92 Stat. 3627; Pub. L. 97–354, § 3(h),Oct. 19, 1982, 96 Stat. 1689; Pub. L. 98–369, div. A, title I, § 174(a)–(b)(4), title VII, § 721(s),July 18, 1984, 98 Stat. 704–707, 970; Pub. L. 99–514, title VIII, §§ 803(b)(5), 806 (c)(2), title XVIII, §§ 1812(c)(1), (2), (3)(C), (4)(A), 1842(a),Oct. 22, 1986, 100 Stat. 2356, 2364, 2834, 2835, 2852; Pub. L. 100–647, title I, §§ 1006(e)(9), 1008(e)(6),Nov. 10, 1988, 102 Stat. 3401, 3441; Pub. L. 105–34, title XIII, § 1308(a), title XVI, § 1604(e)(1),Aug. 5, 1997, 111 Stat. 1041, 1098; Pub. L. 106–170, title V, § 532(c)(2)(C),Dec. 17, 1999, 113 Stat. 1930; Pub. L. 108–357, title VIII, § 841(b),Oct. 22, 2004, 118 Stat. 1598; Pub. L. 111–325, title III, § 306(b),Dec. 22, 2010, 124 Stat. 3549.)
References in Text

Sections 24(b) and 118 of the Internal Revenue Code of 1939, referred to in subsec. (d), were classified to sections 24(b) and 118 of former Title 26, Internal Revenue Code. Sections 24 (b) and 118 were repealed by section 7851 (a)(1) of this title. For table of comparisons of the 1939 Code to the 1986 Code [formerly I.R.C. 1954], see Table I preceding section 1 of this title. See, also, section 7851 (e) of this title for provision that references in the 1986 Code to a provision of the 1939 Code, not then applicable, shall be deemed a reference to the corresponding provision of the 1986 Code, which is then applicable.
Amendments

2010—Subsec. (f)(3)(D). Pub. L. 111–325added subpar. (D).
2004—Subsec. (a)(3). Pub. L. 108–357designated existing provisions as subpar. (A), inserted heading, and added subpar. (B).
1999—Subsec. (f)(3)(B)(i), (iii). Pub. L. 106–170substituted “1221(a)(1)” for “1221(1)”.
1997—Subsec. (b)(13). Pub. L. 105–34, § 1308(a), added par. (13).
Subsec. (f)(4). Pub. L. 105–34, § 1604(e)(1), added par. (4).
1988—Subsec. (a)(1). Pub. L. 100–647, § 1006(e)(9), struck out “(other than a loss in case of a distribution in corporate liquidation)” after “exchange of property” and inserted at end “The preceding sentence shall not apply to any loss of the distributing corporation (or the distributee) in the case of a distribution in complete liquidation.”
Subsec. (a)(2). Pub. L. 100–647, § 1008(e)(6), made technical correction to directory language of Pub. L. 99–514, § 806(c)(2), see 1986 Amendment note below.
1986—Subsec. (a)(2). Pub. L. 99–514, § 806(c)(2), as amended by Pub. L. 100–647, § 1008(e)(6), inserted at end “For purposes of this paragraph, in the case of a personal service corporation (within the meaning of section 441 (i)(2)), such corporation and any employee-owner (within the meaning of section 269A (b)(2), as modified by section 441 (i)(2)) shall be treated as persons specified in subsection (b).”
Subsec. (a)(3). Pub. L. 99–514, § 1812(c)(1), added par. (3).
Subsec. (b)(12). Pub. L. 99–514, § 1812(c)(4)(A), substituted “same persons own” for “same persons owns”.
Subsec. (e)(5)(D). Pub. L. 99–514, § 803(b)(5), substituted in cl. (i) “interest in property described in clause (i), (ii), (iii), or (iv) of section 1250 (a)(1)(B)” for “interest in low-income housing (as defined in paragraph (5) of section 189 (e))” and in cl. (ii) “such property” for “low-income housing (as so defined)”.
Subsec. (e)(6). Pub. L. 99–514, § 1812(c)(3)(C), added par. (6).
Subsec. (f)(3)(B). Pub. L. 99–514, § 1812(c)(2), inserted “(or persons described in subsection (b)(10))”.
Subsec. (g). Pub. L. 99–514, § 1842(a), added subsec. (g).
1984—Subsec. (a). Pub. L. 98–369, § 174(a), amended subsec. (a) generally, substituting “In general” for “Deduction disallowed” in heading, “Deduction for losses disallowed” for “Losses” in par. (1) heading, and provisions dealing with matching of deduction and payee income item in the case of expenses and interest for provisions dealing with unpaid expenses and interest in par. (2).
Subsec. (b)(3). Pub. L. 98–369, § 174(b)(2)(A), substituted “Two corporations which are members of the same controlled group (as defined in subsection (f))” for “Two corporations more than 50 percent in value of the outstanding stock of each of which is owned, directly or indirectly, by or for the same individual, if either one of such corporations, with respect to the taxable year of the corporation preceding the date of the sale or exchange was, under the law applicable to such taxable year, a personal holding company or a foreign personal holding company”.
Subsec. (b)(10). Pub. L. 98–369, § 174(b)(3), substituted “A corporation” for “An S corporation” in introductory provisions and “the corporation” for “the S corporation” in subpar. (A).
Subsec. (b)(12). Pub. L. 98–369, § 174(b)(4), substituted “the same persons” for “the same individual”.
Subsec. (e). Pub. L. 98–369, § 174(b)(1), added subsec. (e).
Pub. L. 98–369, § 174(a)(2), struck out subsec. (e) which provided that for purposes of subsection (a)(2) where the last day of the 21/2 month period falls on Saturday, Sunday, or a legal holiday, such last day be treated as falling on the next succeeding day which is not a Saturday, Sunday, or a legal holiday, and the determination of what constitutes a legal holiday be made under section 7503 with respect to the payor’s return of tax under this chapter for the preceding taxable year.
Subsec. (f). Pub. L. 98–369, § 174(b)(2)(B), added subsec. (f).
Pub. L. 98–369, § 174(b)(1), struck out subsec. (f) which related to special rules for unpaid expenses and interest of S corporations and treatment under such provisions of certain shareholders, etc., as related persons.
Pub. L. 98–369, § 721(s), in closing provision of par. (1) substituted “then any deduction allowable under such sections in respect of such amount shall be allowable as of the day as of which such payment is includible in the gross income of the person to whom the payment is made (or, if later, as of the day on which it would be so allowable but for this paragraph)” for “then no deduction shall be allowed in respect of expenses otherwise deductible under section 162 or 212, or of interest otherwise deductible under section 163, before the day as of which the amount thereof is includible in the gross income of the person to whom the payment is made”.
1982—Subsec. (b)(10) to (12). Pub. L. 97–354, § 3(h)(1), (3), added pars. (10) to (12).
Subsec. (f). Pub. L. 97–354, § 3(h)(2), added subsec. (f).
1978—Subsec. (e). Pub. L. 95–628added subsec. (e).
Effective Date of 2010 Amendment

Pub. L. 111–325, title III, § 306(c),Dec. 22, 2010, 124 Stat. 3550, provided that: “The amendments made by this section [amending this section and section 302 of this title] shall apply to distributions after the date of the enactment of this Act [Dec. 22, 2010].”
Effective Date of 2004 Amendment

Amendment by Pub. L. 108–357applicable to payments accrued on or after Oct. 22, 2004, see section 841(c) ofPub. L. 108–357, set out as a note under section 163 of this title.
Effective Date of 1999 Amendment

Amendment by Pub. L. 106–170applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) ofPub. L. 106–170, set out as a note under section 170 of this title.
Effective Date of 1997 Amendment

Pub. L. 105–34, title XIII, § 1308(c),Aug. 5, 1997, 111 Stat. 1042, provided that: “The amendments made by this section [amending this section and section 1239 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997].”
Pub. L. 105–34, title XVI, § 1604(e)(2),Aug. 5, 1997, 111 Stat. 1098, provided that: “The amendment made by paragraph (1) [amending this section] shall take effect as if included in section 174(b) of the Tax Reform Act of 1984 [Pub. L. 98–369].”
Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) ofPub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment

If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by section 803(b)(5) ofPub. L. 99–514is applicable to such interest costs only to the extent such interest costs are attributable to costs which were required to be capitalized under section 263 of the Internal Revenue Code of 1954 and which would have been taken into account in applying section 189 of the Internal Revenue Code of 1954 (as in effect before its repeal by section 803 ofPub. L. 99–514) or, if applicable, section 266 of such Code, see section 7831(d)(2) ofPub. L. 101–239, set out as an Effective Date note under section 263A of this title.
Amendment by section 803(b)(5) ofPub. L. 99–514applicable, except as otherwise provided, to costs incurred after Dec. 31, 1986, in taxable years ending after that date, see section 803(d) ofPub. L. 99–514, set out as a note under section 263A of this title.
Amendment by section 806(c)(2) ofPub. L. 99–514applicable to taxable years beginning after Dec. 31, 1986, with special provisions applicable to taxpayers who are required to change their accounting periods, see section 806(e) ofPub. L. 99–514, set out as a note under section 1378 of this title.
Amendment by sections 1812(c)(1), (2), (3)(C), (4)(A) and 1842(a) ofPub. L. 99–514effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 ofPub. L. 99–514, set out as a note under section 48 of this title.
Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 174(c),July 18, 1984, 98 Stat. 707, as amended by Pub. L. 99–514, § 2,Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) Subsections (a) and (b)(1).—The amendments made by subsections (a) and (b)(1) [amending this section] shall apply to amounts allowable as deductions under chapter 1 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] for taxable years beginning after December 31, 1983. For purposes of the preceding sentence, the allowability of a deduction shall be determined without regard to any disallowance or postponement of deductions under section 267 of such Code.
“(2) Subsection (b) (other than paragraph (1)).—
“(A) In general.—Except as provided in subparagraph (B), the amendments made by subsection (b) (other than paragraph (1) thereof) [amending this section and sections 170, 368, 514, and 1235 of this title] shall apply to transactions after December 31, 1983, in taxable years ending after such date.
“(B) Exception for transfers to foreign corporations on or before march 1, 1984.—The amendments made by subsection (b)(2) [amending this section] shall not apply to property transferred to a foreign corporation on or before March 1, 1984.
“(3) Exception for existing indebtedness, etc.—
“(A) In general.—The amendments made by this section [amending this section and sections 170, 368, 514, and 1235 of this title] shall not apply to any amount paid or incurred—
“(i) on indebtedness incurred on or before September 29, 1983, or
“(ii) pursuant to a contract which was binding on September 29, 1983, and at all times thereafter before the amount is paid or incurred.
“(B) Treatment of renegotiations, extensions, etc.—If any indebtedness (or contract described in subparagraph (A)) is renegotiated, extended, renewed, or revised after September 29, 1983, subparagraph (A) shall not apply to any amount paid or incurred on such indebtedness (or pursuant to such contract) after the date of such renegotiation, extension, renewal, or revision.”
Amendment by section 721(s) ofPub. L. 98–369effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) ofPub. L. 98–369, set out as a note under section 1361 of this title.
Effective Date of 1982 Amendment

Amendment by Pub. L. 97–354applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) ofPub. L. 97–354, set out as an Effective Date note under section 1361 of this title.
Effective Date of 1978 Amendment

Pub. L. 95–628, § 2(b),Nov. 10, 1978, 92 Stat. 3627, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to payments made after the date of the enactment of this Act [Nov. 10, 1978].”
Construction of Section 806 of Pub. L. 99–514

Nothing in section 806 ofPub. L. 99–514[amending this section] or in any legislative history relating thereto to be construed as requiring the Secretary of the Treasury or his delegate to permit an automatic change of a taxable year, see section 1008(e)(9) ofPub. L. 100–647, set out as a note under section 1378 of this title.
Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 ofPub. L. 99–514, as amended, set out as a note under section 401 of this title.
Exception for Certain Indebtedness

Pub. L. 99–514, title XVIII, § 1812(c)(5),Oct. 22, 1986, 100 Stat. 2835, provided that: “Clause (i) of section 174(c)(3)(A) of the Tax Reform Act of 1984 [section 174(c)(3)(A)(i) ofPub. L. 98–369, set out as a note above] shall be applied by substituting ‘December 31, 1983’ for ‘September 29, 1983’ in the case of indebtedness which matures on January 1, 1999, the payments on which from January 1989 through November 1993 equal U/L plus $77,600, the payments on which from December 1993 to maturity equal U/L plus $50,100, and which accrued interest at 13.75 percent through December 31, 1989.”

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