SECTION 8. REVOCATION OF

CONSENT UNDER § 1.1502–13(e)(3)

.01 Consent to treat intercompany transactions on a separate entity basis under § 1.1502–13(e)(3) is revoked automatically for any taxable year in which the Effect on CTI, when averaged with the Effect on CTI for each of the two preceding taxable years, is greater than 10 percent. The consolidated group must attach a statement to its original return for the taxable year in which the consent is revoked, indicating that the consent under

taxable years preceding the consent year, between (a) CTI computed by treating all intercompany transactions on a single entity basis and (b) CTI computed by treating those intercompany transactions for which consent is requested, and those intercompany transactions for which consent has previously been obtained, on a separate entity basis. For any taxable year, the percentage difference between (a) and (b) in the preceding sentence is hereinafter referred to as the “Effect on CTI.”

4. An analysis of all intercompany transactions for the consent year and for each of the two taxable years preceding the consent year. This analysis must include the number and a description of all intercompany transactions and the dollar amounts thereof.

5. An analysis of the effect of treating those intercompany transactions for which consent is requested on a separate entity basis on the following items for the consent year:

(a) Net operating loss carryovers. (b) Capital loss carryovers. (c) Tax credits (for example, foreign tax credits) in the consent year as well as carryovers to the consent year.

With respect to any carryovers referred to in items (a) through (c) above, the analysis should include amounts for each of the carryover years and the date the losses or credits expire.

6. An analysis of whether any sales of property for which consent is requested between members of the consolidated group that would be depreciable or depletable property in the hands of the buying member would result in long-term capital gain to the selling member, taking into account the provisions of §§ 1239, 1245, and 1250, relating to gain from dispositions of certain depreciable property or certain depreciable realty.

7. An analysis of whether any of the members involved in those intercompany transactions for which consent is requested are subject to the separate return limitation year rules or the change of ownership rules under §§ 382 or 383, and a calculation of any amounts subject to limitation under those rules.

8. A description of the type or types of property to which the consent would apply.

9. An analysis of the frequency of those intercompany transactions for which consent is requested, whether they

occur in the ordinary course of the consolidated group’s business, and whether the amounts or prices charged in connection with these intercompany transactions are for fair market value based on arm’s length bargaining, providing examples thereof. Also include a discussion of whether gains from these intercompany transactions have resulted from arm’s length charges or prices.

10. An explanation as to why the consent is being requested, why the consolidated group believes it should not be required to treat these intercompany transactions on a single entity basis, and how treating such transactions on a separate entity basis will clearly reflect CTI under § 446.