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Loss disallowed for abandoned network affiliation contract.

In Letter Ruling (TAM) 9738001, the IRS National Office ruled that A television broadcaster that terminated an affiliation contract with one network to enter into a contract with another network may not take a Sec. 165(a) loss for its basis in the terminated contract.

The broadcaster argued that competition from cable television threatened its ratings and that the change in affiliation enabled it to compete more effectively The Service however, applied the reasoning in Hearst Corp., 13 Cl. Ct. 178 (1987), and concluded that the relevant asset for loss purposes was the broadcaster's ability to affiliate with a major television network, not its affiliation with a particular network. Because the broadcaster die! not lose its ability to make such an affiliation, the loss deduction was not allowed.

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Author:Dell, F. Michael
Publication:The Tax Adviser
Date:Jan 1, 1998
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