Filippo Inzaghi confirmed on Sunday that Milan and Atletico Madrid are working on a swap deal with Fernando Torres and Alessio Cerci.
Milan's coach has not had much use for Torres this season, picking him for 10 of the club's 16 Serie A matches, with the Spanish striker scoring just once.
Jeremy Menez (16 games, eight goals), Keisuke Honda (16, six) and Stephan El Shaarawy (12, one) have been Inzaghi's preferred options up front, and despite signing Torres on a permanent deal from Chelsea, Milan are happy to send the 30-year-old back home on loan.
Speaking ahead of Tuesday's friendly with Real Madrid in Dubai, Inzaghi verified rumours that Milan and Atletico are working on a deal.
"The negotiation for the swap of [Fernando] Torres and [Alessio] Cerci is well under way but nothing has been confirmed so far," Inzaghi said.
"For now, Torres has been confirmed as a permanent Milan player and then, once the transfer window opens [on January 5], we'll see what's going to happen."
Milan entered Serie A's winter break in seventh on 25 points having defeated fourth-placed Napoli 2-0 and drawing 0-0 with second-placed Roma in the last two matches.
Inzaghi hopes the friendly against the recently-crowned Club World Cup champions will ensure Milan restart Serie A in top form when they host Sassuolo on January 6.
Captain Riccardo Montolivo agreed: "It's a game which can give us a lot.
"It's going to be a good training game, if I can say that since when two top teams like Real Madrid and AC Milan play it's never a friendly.
"A game like this will help us restart again to get back on track in the Serie A, that's our main target. This will be a great test to know where we are at and start thinking about our league after the Christmas break."