SECTION 4. APPLICATION

The Service will accept the position that an S corporation’s election is not affected as a result of an ESOP’s distribution of S corporation stock where the participant directs that such stock be distributed to an IRA in a direct rollover, provided that:

2003–11 I.R.B. 599 March 17, 2003

sale or exchange of the asset (except in the case of stock or securities traded on an established securities market, the settlement date) for which the loss is claimed.

.03 Other losses . The following losses under § 165 are not taken into account in determining whether a transaction is a loss transaction under § 1.6011–4(b)(5):

(1) A loss from fire, storm, shipwreck, or other casualty, or from theft, under § 165(c)(3);

(2) A loss from a compulsory or involuntary conversion as described in §§ 1231(a)(3)(A)(ii) and 1231(a)(4)(B);

(3) A loss arising from any markto-market treatment of an item under §§ 475, 1256, 1296(a), 1.446–4(e), 1.988– 5(a)(6), or 1.1275–6(d)(2), provided that the taxpayer computes its loss by using a qualifying basis (as defined in section 4.02(2) of this revenue procedure) or a basis resulting from previously marking the item to market, or computes its loss by making appropriate adjustments for previously determined mark-to-market gain or loss as provided, for example, in § 475(a) or § 1256(a)(2);

(4) A loss arising from a hedging transaction described in § 1221(b), if the taxpayer properly identifies the transaction as a hedging transaction, or from a mixed straddle account under § 1.1092(b)– 4T; (5) A loss attributable to basis increases under § 860C(d)(1) during the period of the taxpayer’s ownership;

(6) A loss attributable to the abandonment of depreciable tangible property that was used by the taxpayer in a trade or business and that has a qualifying basis under section 4.02(2) of this revenue procedure;

(7) A loss arising from the bulk sale of inventory if the basis of the inventory is determined under § 263A; or

(8) A loss that is equal to, and is determined solely by reference to, a payment of cash by the taxpayer (for example, a cash payment by a guarantor that results in a loss or a cash payment that is treated as a loss from the sale of a capital asset under § 1234A or § 1234B).