The conduct of the IRS is governed by the tax code, Section 26 of the
United States Code. It is further governed by an extensive set of
regulations which interpret the code.
"IRS Rule 269" appears to be a reference to Section 269 of the
Internal Revenue Code, or 26 USC 269. You can find that document
The regulations which assist in the interpretation of that section of
the Internal Revenue Code can also be found online as part of the
"Code of Federal Regulations":
IRC Section 269 relates to the tax consequences resulting from the
acquisition of a company by a different company or individual. If the
primary purpose of obtaining the company (or a controlling interest in
the company) was to obtain a tax deduction, credit or allowance with
the person or company would not otherwise enjoy, the deduction,
credit, or allowance may be disallowed.
Note that the language is permissive - there is a big difference
between a deduction that "may" be disallowed and a deduction that
"must" be disallowed. If possible, it would be important for a person
or company which might be confronted with that language to try to get
an advance ruling, as to whether part or all of the deduction, credit
or allowance would be disallowed.
If your company has engaged in conduct which implicates this section
of the tax code, you should be able to avoid its application by
establishing that the primary purpose of your acquisition was not to
obtain a tax deduction, credit, or allowance relating to the losses
you incurred as a result of the acquisition. If you do not think you
can prove that you had a different purpose in mind, or to cover your
bases in case the IRS does not accept your explanation, you would need
to prepare arguments under subsection (c) which might convince the IRS
to nonetheless allow part or all of the deduction, credit, or
allowance at issue.
The IRS provides some examples on the application of this rule,
through the regulation posted at
If after reviewing the statute you do not believe it is relevant to
your situation, please clarify your question, providing additional
information about where you heard about "IRS rule 269" and why you
were told it might apply to your situation.
* You can look up the United States Code by chapter and section on the
Cornell Law School website, at
* The Code of Federal Regulations is online on the Government Printing
Office website, at
* The IRS offers assistance with tax law questions through its