TITLE 26. INTERNAL REVENUE CODE § 267. Losses, expenses, and interest with respect to transactions between related taxpayers., 26 USCS § 267
Summary
(a) In general.
(1) Deduction for losses disallowed. No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or indirectly, between persons specified in any of the paragraphs of subsection (b). The preceding sentence shall not apply to any loss of the distributing corporation (or the distributee) in the case of a distribution in complete liquidation.
(2) Matching of deduction and payee income item in the case of expenses and interest. If—
then any deduction allowable under this chapter...