Rev. Rul. 73-498

The Internal Revenue Service has reconsidered the position set forth in Rev. Rul. 65-293, 1965-2 C.B. 323, with respect to whether a domestic corporation meeting the requirements of both section 921 and section 931 of the Internal Revenue Code of 1954 (relating to Western Hemisphere trade corporations and possessions corporations, respectively) may be considered an "includible corporation" within the meaning of section 1504(b)(4) and be included in a consolidated return of an affiliated group for the years it has net operating losses and be excluded for years it has taxable income.

Rev. Rul. 65-293 held that a corporation meeting the requirements of both section 921 and section 931 of the Code is in a "class of corporations" specifically excluded from the term "includible corporation." It may not be included in a consolidated return of an affiliated group regardless of whether it chooses not to take advantage of section 931.

In Burke Concrete Accessories, Inc., 56 T.C. 588 (1971) (acquiescence page 1), the United States Tax Court held that where a domestic subsidiary of the taxpayer qualified under section 931 of the Code as a possession corporation and under section 921 as a Western Hemisphere trade corporation and would not derive any benefits in 1965 from either section 921 or section 931 because it had a net loss in 1965, the domestic subsidiary was an "includible corporation" and could join in filing a consolidated return.

In view of the decision in Burke Concrete Accessories, Inc., the Service has reconsidered the holding in Rev. Rul. 65-293. It is now the position of the Service that a United States corporation which meets the requirements of both section 931 and section 921 of the Code for a taxable year but does not derive any benefits from section 931 because it had a net operating loss for such year is an includible corporation within the meaning of section 1504(b)(4) even though it otherwise meets the requirements of section 931.

Compare Rev. Rul. 73-493, page 294, which holds, with respect to an individual, that where no benefits are conferred by section 931 of the Code, the taxpayer who satisfies the conditions thereof is entitled to file his Federal income tax return and compute the tax thereon without regard to section 931.

Rev. Rul. 65-293 is hereby revoked.