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From the SRD

If the familiar dies or is dismissed by the sorcerer, the sorcerer must attempt a DC 15 Fortitude saving throw. Failure means he loses 200 experience points per sorcerer level; success reduces the loss to one-half that amount. However, a sorcerer’s experience point total can never go below 0 as the result of a familiar’s demise or dismissal. A slain or dismissed familiar cannot be replaced for a year and day. A slain familiar can be raised from the dead just as a character can be, and it does not lose a level or a Constitution point when this happy event occurs.

What it doesn't say is anything about level loss. XP loss from crafting doesn't cause you to lose a level but I can't seem to find anything regarding it otherwise right now. Does anyone know of a RAW answer to this or other examples to use for RAI precedent? RAW is preferred if possible.

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    \$\begingroup\$ It's not that spending XP to create magic items doesn't cause level loss but that the creator just can't spend so much XP to cause level loss: "A character cannot spend so much XP on an item that he or she loses a level." (Same thing applies to spells with an XP component.) \$\endgroup\$
    – Hey I Can Chan
    Commented Jul 30, 2015 at 22:43
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    \$\begingroup\$ Fun fact: One of the caveats about the 3.5 SRD is that all information about gaining and losing levels (with very few exceptions) is considered Product Identity, and isn't included. That's why you don't see the XP tables in the SRD, and why the information you're asking about was omitted. \$\endgroup\$
    – DuckTapeAl
    Commented Jul 30, 2015 at 23:36
  • \$\begingroup\$ Ah, gotta love that Product Identity. Some of us just don't have the bloody time to read every line in every book every time there's a question, nor the memory to remember it all from the past lol. \$\endgroup\$
    – Dorian
    Commented Aug 1, 2015 at 2:57

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Yes. There is such an example in the Player's Handbook on page 54, as part of the description of the sorcerer's familiar class feature:

For example, suppose that Hennet is a 3rd-level sorcerer with 3,230 XP when his owl familiar is killed by a bugbear. Hennet makes a successful saving throw, so he loses 300 XP, dropping him below 3,000 XP and back to 2nd level

The SRD omits this example. It also implies that even if you make the saving throw, there's no added benefit besides reducing the XP loss.

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