Tax Court - No duplicate deductions for stock loss and for decrease in asset value 

September 11:  The U.S. Tax Court today granted summary judgment for the IRS in a memorandum opinion, concluding that the taxpayer was not entitled to deductions based on a stock loss and on a decrease in asset value because the decrease in the value of the assets of a corporation and the decrease in value of the stock of the corporation represented the same economic decline in value. Duquesne Light Holdings, Inc. v. Commissioner, T.C. Memo 2013-216 (September 11, 2013)

Read the Tax Court opinion [PDF 243 KB]

Summary

The taxpayer claimed a deduction for tax year 2001 concerning a stock loss attributable to its claimed sale on December 31, 2001, of stock in an indirect wholly owned subsidiary.


The taxpayer subsequently claimed deductions for 2002 asset losses and for 2003 asset losses—losses attributable to the subsidiary’s sales in 2002 of certain of its assets and sale in 2003 of all of its remaining assets.


The value of the taxpayer’s class A stock in the subsidiary at the end of 2001 reflected the value of all of the assets that the subsidiary owned at that time and that it sold in 2002 and 2003.


The Tax Court concluded that there is no genuine dispute of material fact as to whether the deductions (1) for tax years 2002 and 2003 of a total of approximately $199 million of the 2002 asset losses and the 2003 asset losses and (2) for tax year 2001 of $199 million of the 2001 stock loss represented the same economic losses and therefore were duplicate or double deductions.




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