Guidance for Treasury in Drafting Regulations Interpreting Section 469(g)

ABSTRACT Section 469 provides generally that losses from passive activities may offset income from passive activities, but cannot be deducted against nonpassive income. Any excess of passive losses over passive income in a taxable year is suspended and carried forward as a passive loss to subsequent years. Under Section 469(g), a taxpayer's suspended passive losses from an activity are freed up when the taxpayer sells his entire interest in the activity to an unrelated person in a fully taxable transaction. However, if the sale is to a related party, then the suspended losses remain suspended (but remain with the taxpayer) until the activity thereafter is sold in a fully taxable transaction to a party unrelated to the taxpayer. In our analysis, we consider legal, conceptual, and practical concerns affecting transactions governed by Section 469(g) and show that Section 469(g) should be interpreted under a hybrid theory for passthrough entities, rather than under a pure aggregate theory or pure entity theory. Through examples, we provide guidance to Treasury in drafting long-overdue regulations interpreting Section 469(g) for Chapter 1 (income tax) and Chapter 2A (Section 1411) purposes. In addition, we recommend that Congress amend Section 469(g)(1)(B) to require that in order to free up a taxpayer's suspended losses, the acquirer in a subsequent sale of the passive activity interest must be unrelated to the seller in that transaction, rather than to the taxpayer.

Reproduction in the amphipod, Echinogammarus marinus: a comparison between normal and intersex specimens

The fecundity and occurrence of intersexuality in the amphipod, Echinogammarus marinus, collected from populations on the east coast of Scotland are reported. Intersex specimens have significantly smaller mean brood sizes than normal specimens. Embryo survival, as measured by the ratio of eggs/embryos in early and late stages of development, is lower in intersex specimens than normal specimens. Greater differences in the number of early stage eggs compared with late stage eggs in intersex specimens is suggested to arise by the active ejection of non-viable eggs, or from the passive loss of eggs through malformed brood plates in females. An apparent reduction in brood sizes between early and late stages of development in ‘normal’ specimens, emphasizes the importance of quantifying different egg/embryo stages in amphipod toxicology and fecundity studies.