Loss Disallowance Rule - LDR

An Internal Revenue Service rule implemented in 1991 to prevent a consolidated group - a business conglomerate filing a single tax return on behalf of its subsidiaries - from taking a tax deduction for losses on the sale of a subsidiary's stock. The IRS wanted to make sure corporations paid taxes on their capital gains and wanted to prevent them from claiming the same loss twice as a tax deduction - known as a duplicated loss.

An important court case for the loss disallowance rule was Rite Aid Corp v. United States. In this case, the Federal Circuit Court of Appeals rejected the IRS's duplicated loss component of the loss disallowance rule.