The segregation rules are a set of rules that require the separation of a loss corporation’s pre-existing public groups from the new public group that is created as a result of a transaction that is subject to the segregation rules. The new public group becomes a 5-percent shareholder of the loss corporation and remains separate from all other pre-existing public groups until the three-year testing date on which the public group was formed expires.
See Treas. Reg. § 1.382-2T(j)(2)(iii)(B).