866. Depreciatory transactions.

If there is a disposal by one group member to another of an asset at a nominal figure, neither gain nor loss arises1. This may cause a decline in the value of the former company. Losses resulting from such depreciatory transactions which are realised on a subsequent disposal of the shares or securities on or after 31 March 1982 are disallowed2. The disallowance is limited to the undervalue of the transaction