AICPA criticizes dual consolidated loss rules as unnecessarily restrictive.

The Internal Revenue Service's temporary regulations on dual consolidated losses exceed Congress's mandate to prevent an entity from claiming losses in two jurisdictions, the American Institute of CPAs said in comments submitted to IRS Commissioner Shirley Peterson. The comments were prepared by the AICPA international taxation committee.

"There are many legitimate international business transactions that are unfairly penalized by the temporary regulations," wrote the chairman of the AICPA federal tax executive committee, Leonard Podolin, in a letter accompanying the comments.

The regulations unnecessarily restrict the buying and selling of assets and corporations for valid business reasons, the comments charged.

The AICPA recommended that the IRS modify the regulations to disallow only foreign losses actually used to offset the income of foreign corporations for foreign tax purposes.

The AICPA offered several other suggestions. It recommended that the rules clarify that a domestic corporation will be considered a dual resident corporation only if it is itself subject to income tax in the foreign country, either directly or because, under foreign law, it is severally liable as a member of a foreign consolidated or combined tax return.

The AICPA also proposed that section 1504(d) corporations be excluded from the dual consolidated loss regulations without being re* quired to enter into a binding loss recapture agreement when there is no related entity in the country of incorporation against which foreign losses can be offset.