[Federal Register Volume 61, Number 125 (Thursday, June 27, 1996)]
[Rules and Regulations]
[Pages 33335-33365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15824]
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DEPARTMENT OF THE TREASURY
26 CFR Parts 1 and 602
[TD 8678]
RIN 1545-AU36
Regulations Under Section 1502 of the Internal Revenue Code of
1986; Limitations on Net Operating Loss Carryforwards and Certain
Built-in Losses and Credits Following an Ownership Change of a
Consolidated Group
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations regarding the
operation of sections 382 and 383 of the Internal Revenue Code of 1986
(relating to limitations on net operating loss carryforwards and
certain built-in losses and credits following an ownership change) with
respect to consolidated groups. The regulations include rules for
determining whether a loss group or a loss subgroup has an ownership
change, for computing a consolidated section 382 limitation or subgroup
section 382 limitation, and for applying sections 382 and 383 to
corporations that join or leave a group. The rules are necessary to
provide guidance to such groups on the use of certain of their tax
attributes. The text of these temporary regulations also serves as the
text of the proposed regulations set forth in the notice of proposed
rulemaking on this subject in the Proposed Rules section of this issue
of the Federal Register.
DATES: These regulations are effective June 27, 1996.
For dates of application and special transition rules, see
Effective Dates under SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: David B. Friedel at (202) 622-7550
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in the temporary
regulations has been reviewed and approved by the Office of Management
and Budget in accordance with the Paperwork Reduction Act (44 U.S.C.
3507) under the control number 1545-1218. The collection requires a
response from certain consolidated groups. The IRS requires the
information described in Sec. 1.1502-95T(e) to assure that a section
382 limitation is properly determined in cases of corporations that
cease to be members of a group. Responses to this collection of
information are required to obtain a benefit (relating to the section
382 limition applicable to the departing member(s)).
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
For further information concerning this collection of information,
and where to submit comments on the collection of information and the
accuracy of the estimated burden, and suggestions for reducing this
burden, please refer to the preamble to the cross-referencing notice of
proposed rulemaking published in the Proposed Rules section of this
issue of the Federal Register.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background and Explanation of Provisions
On February 4, 1991, the IRS and Treasury issued three notices of
proposed rulemaking, CO-132-87 (56 FR 4194), CO-077-90 (56 FR 4183),
and CO-078-90 (56 FR 4228), setting forth rules regarding the
application of sections 382 and 383 by consolidated groups and by
controlled groups, and regarding the use of built-in deductions and net
operating losses and capital losses, including the carryover and
carryback of separate return limitation year (SRLY) losses of members
of consolidated groups. The preambles to the three proposed regulations
explain their rules in detail. The IRS and Treasury also published
Notice 91-27 (1991-2 C.B. 629) to advise of intended modifications to
the proposed regulations.
For reasons explained in the preamble to TD 8677 (published
elsewhere in this issue of the Federal Register), the IRS and Treasury
are issuing temporary amendments concerning the use of built-in
deductions and net operating losses and capital losses of members of
consolidated groups. Some of the rules in those temporary amendments
are closely related to rules regarding the application of section 382
to members of consolidated groups (for example, rules relating to
built-in deductions and subgroups). Because of the close relationship,
and in order to give consolidated groups immediate guidance on the
application of sections 382 and 383, the IRS and Treasury are issuing
these temporary amendments. The temporary amendments are substantially
identical to the rules proposed on January 29, 1991.
These temporary amendments do not address the comments on the
proposed amendments. Many of these comments are still under
consideration.
As a companion to this Treasury decision, the IRS and Treasury are
also issuing temporary regulations relating to the application of
sections 382 and 383 by members of controlled groups. See TD 8679
published elsewhere in this issue of the Federal Register.
Effective Dates
The temporary regulations are generally effective for testing dates
that occur on or after January 1, 1997. Transition rules contained in
the proposed amendments are retained and made applicable to testing
dates before January 1, 1997.
[[Page 33336]]
Special Analysis
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It is hereby certified that
these regulations do not have a significant economic impact on a
substantial number of small entities. This certification is based on
the fact that these regulations will primarily affect affiliated groups
of corporations that have elected to file consolidated returns, which
tend to be larger businesses. Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations were sent
to the Small Business Administration for comment on their impact on
small business.
Drafting Information
The principal author of the temporary regulations is David B.
Friedel of the Office of Assistant Chief Counsel (Corporate), IRS.
Other personnel from the IRS and Treasury participated in their
development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1502-91T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-92T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-93T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-94T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-95T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-96T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-98T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502.
Section 1.1502-99T also issued under 26 U.S.C. 382(m) and 26
U.S.C. 1502. * * *
Par. 2. Sections 1.1502-90T through 1.1502-99T are added to read as
follows:
Sec. 1.1502-90T Table of contents (temporary).
The following table contains the major headings in Secs. 1.1502-91T
through 1.1502-99T.
Sec. 1.1502-91T Application of section 382 with respect to a
consolidated group (temporary).
(a) Determination and effect of an ownership change.
(1) In general.
(2) Special rule for post-change year that includes the change date.
(3) Cross reference.
(b) Definitions and nomenclature.
(c) Loss group.
(1) Defined.
(2) Coordination with rule that ends separate tracking.
(3) Example.
(d) Loss subgroup.
(1) Net operating loss carryovers.
(2) Net unrealized built-in loss.
(3) Loss subgroup parent.
(4) Principal purpose of avoiding a limitation.
(5) Special rules.
(6) Examples.
(e) Pre-change consolidated attribute.
(1) Defined.
(2) Example.
(f) Pre-change subgroup attribute.
(1) Defined.
(2) Example.
(g) Net unrealized built-in gain and loss.
(1) In general.
(2) Members included.
(i) Consolidated group.
(ii) Loss subgroup.
(3) Acquisitions of built-in gain or loss assets.
(4) Indirect ownership.
(h) Recognized built-in gain or loss.
(1) In general. [Reserved]
(2) Disposition of stock or an intercompany obligation of a member.
(3) Deferred gain or loss.
(4) Exchanged basis property.
(i) [Reserved]
(j) Predecessor and successor corporations.
Sec. 1.1502-92T Ownership change of a loss group or a loss
subgroup (temporary).
(a) Scope.
(b) Determination of an ownership change.
(1) Parent change method.
(i) Loss group.
(ii) Loss subgroup.
(2) Examples.
(3) Special adjustments.
(i) Common parent succeeded by a new common parent.
(ii) Newly created loss subgroup parent.
(iii) Examples.
(4) End of separate tracking of certain losses.
(c) Supplemental rules for determining ownership change.
(1) Scope.
(2) Cause for applying supplemental rule.
(3) Operating rules.
(4) Supplemental ownership change rules.
(i) Additional testing dates for the common parent (or loss subgroup
parent).
(ii) Treatment of subsidiary stock as stock of the common parent (or
loss subgroup parent).
(iii) 5-percent shareholder of the common parent (or loss subgroup
parent).
(5) Examples.
(d) Testing period following ownership change under this section.
(e) Information statements.
(1) Common parent of a loss group.
(2) Abbreviated statement with respect to loss subgroups.
Sec. 1.1502-93T Consolidated section 382 limitation (or
subgroup section 382 limitation) (temporary).
(a) Determination of the consolidated section 382 limitation (or
subgroup section 382 limitation).
(1) In general.
(2) Coordination with apportionment rule.
(b) Value of the loss group (or loss subgroup).
(1) Stock value immediately before ownership change.
(2) Adjustment to value.
(3) Examples.
(c) Recognized built-in gain of a loss group or loss subgroup.
(d) Continuity of business.
(1) In general.
(2) Example.
(e) Limitations of losses under other rules.
Sec. 1.1502-94T Coordination with section 382 and the
regulations thereunder when a corporation becomes a member of a
consolidated group (temporary).
(a) Scope.
(1) In general.
(2) Successor corporation as new loss member.
(3) Coordination in the case of a loss subgroup.
(4) End of separate tracking of certain losses.
(5) Cross-reference.
(b) Application of section 382 to a new loss member.
(1) In general.
(2) Adjustment to value.
(3) Pre-change separate attribute defined.
(4) Examples.
(c) Built-in gains and losses.
(d) Information statements.
Sec. 1.1502-95T Rules on ceasing to be a member of a
consolidated group (or loss subgroup) (temporary).
(a) In general.
(1) Consolidated group.
(2) Election by common parent.
(3) Coordination with Secs. 1.1502-91T through 1.1502-93T.
(b) Separate application of section 382 when a member leaves a
consolidated group.
(1) In general.
(2) Effect of a prior ownership change of the group.
(3) Application in the case of a loss subgroup.
(4) Examples.
(c) Apportionment of a consolidated section 382 limitation.
(1) In general.
(2) Amount of apportionment.
(3) Effect of apportionment on the consolidated section 382
limitation.
(4) Effect on corporations to which the consolidated section 382
limitation is apportioned.
[[Page 33337]]
(5) Deemed apportionment when loss group terminates.
(6) Appropriate adjustments when former member leaves during the
year.
(7) Examples.
(d) Rules pertaining to ceasing to be a member of a loss subgroup.
(1) In general.
(2) Examples.
(e) Filing the election to apportion.
(1) Form of the election to apportion.
(2) Signing of the election.
(3) Filing of the election.
(4) Revocation of election.
Sec. 1.1502-96T Miscellaneous rules (temporary).
(a) End of separate tracking of losses.
(1) Application.
(2) Effect of end of separate tracking.
(3) Continuing effect of end of separate tracking.
(4) Special rule for testing period.
(5) Limits on effects of end of separate tracking.
(b) Ownership change of subsidiary.
(1) Ownership change of a subsidiary because of options or plan or
arrangement.
(2) Effect of the ownership change.
(i) In general.
(ii) Pre-change losses.
(3) Coordination with Secs. 1.1502-91T, 1.1502-92T, and 1.1502-94T.
(4) Example.
(c) Continuing effect of an ownership change.
Sec. 1.1502-97T Special rules under section 382 for members
under the jurisdiction of a court in a title 11 or similar case
(temporary). [Reserved]
Sec. 1.1502-98T Coordination with section 383 (temporary).
Sec. 1.1502-99T Effective dates (temporary).
(a) Effective date.
(b) Testing period may include a period beginning before January 1,
1997.
(c) Transition rules.
(1) Methods permitted.
(i) In general.
(ii) Adjustments to offset excess limitation.
(iii) Coordination with effective date.
(2) Permitted methods.
(d) Amended returns.
(e) Section 383.
Sec. 1.1502-91T Application of section 382 with respect to a
consolidated group (temporary).
(a) Determination and effect of an ownership change--(1) In
general. This section and Secs. 1.1502-92T and 1.1502-93T set forth the
rules for determining an ownership change under section 382 for members
of consolidated groups and the section 382 limitations with respect to
attributes described in paragraphs (e) and (f) of this section. These
rules generally provide that an ownership change and the section 382
limitation are determined with respect to these attributes for the
group (or loss subgroup) on a single entity basis and not for its
members separately. Following an ownership change of a loss group (or a
loss subgroup) under Sec. 1.1502-92T, the amount of consolidated
taxable income for any post-change year which may be offset by pre-
change consolidated attributes (or pre-change subgroup attributes)
shall not exceed the consolidated section 382 limitation (or subgroup
section 382 limitation) for such year as determined under Sec. 1.1502-
93T.
(2) Special rule for post-change year that includes the change
date. If the post-change year includes the change date, section
382(b)(3)(A) is applied so that the consolidated section 382 limitation
(or subgroup section 382 limitation) does not apply to the portion of
consolidated taxable income that is allocable to the period in the year
on or before the change date. See generally Sec. 1.382-6 (relating to
the allocation of income and loss). The allocation of consolidated
taxable income for the post-change year that includes the change date
must be made before taking into account any consolidated net operating
loss deduction (as defined in Sec. 1.1502-21T(a)).
(3) Cross reference. See Secs. 1.1502-94T and 1.1502-95T for rules
that apply section 382 to a corporation that becomes or ceases to be a
member of a group or loss subgroup.
(b) Definitions and nomenclature. For purposes of this section and
Secs. 1.1502-92T through 1.1502-99T, unless otherwise stated:
(1) The definitions and nomenclature contained in section 382 and
the regulations thereunder (including the nomenclature and assumptions
relating to the examples in Sec. 1.382-2T(b)) and this section and
Secs. 1.1502-92T through 1.1502-99T apply; and
(2) In all examples, all groups file consolidated returns, all
corporations file their income tax returns on a calendar year basis,
the only 5-percent shareholder of a corporation is a public group, the
facts set forth the only owner shifts during the testing period, and
each asset of a corporation has a value equal to its adjusted basis.
(c) Loss group--(1) Defined. A loss group is a consolidated group
that:
(i) Is entitled to use a net operating loss carryover to the
taxable year that did not arise (and is not treated under Sec. 1.1502-
21T(c) as arising) in a SRLY;
(ii) Has a consolidated net operating loss for the taxable year in
which a testing date of the common parent occurs (determined by
treating the common parent as a loss corporation); or
(iii) Has a net unrealized built-in loss (determined under
paragraph (g) of this section by treating the date on which the
determination is made as though it were a change date).
(2) Coordination with rule that ends separate tracking. A
consolidated group may be a loss group because a member's losses that
arose in (or are treated as arising in) a SRLY are treated as described
in paragraph (c)(1)(i) of this section. See Sec. 1.1502-96T(a).
(3) Example. The following example illustrates the principles of
this paragraph (c).
Example. Loss group. (a) L and L1 file separate returns and each
has a net operating loss carryover arising in Year 1 that is carried
over to Year 2. A owns 40 shares and L owns 60 shares of the 100
outstanding shares of L1 stock. At the close of Year 1, L buys the
40 shares of L1 stock from A. For Year 2, L and L1 file a
consolidated return. The following is a graphic illustration of
these facts:
BILLING CODE 4830-01-U
[[Page 33338]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.002
(b) L and L1 become a loss group at the beginning of Year 2
because the group is entitled to use the Year 1 net operating loss
carryover of L, the common parent, which did not arise (and is not
treated under Sec. 1.1502-21T(c) as arising) in a SRLY. See
Sec. 1.1502-94T for rules relating to the application of section 382
with respect to L1's net operating loss carryover from Year 1 which
did arise in a SRLY.
(d) Loss subgroup--(1) Net operating loss carryovers. Two or more
corporations that become members of a consolidated group (the current
group) compose a loss subgroup if:
(i) They were affiliated with each other in another group (the
former group), whether or not the group was a consolidated group;
(ii) They bear the relationship described in section 1504(a)(1) to
each other through a loss subgroup parent immediately after they become
members of the current group; and
(iii) At least one of the members carries over a net operating loss
that did not arise (and is not treated under Sec. 1.1502-21T(c) as
arising) in a SRLY with respect to the former group.
(2) Net unrealized built-in loss. Two or more corporations that
become members of a consolidated group compose a loss subgroup if they:
(i) Have been continuously affiliated with each other for the 5
consecutive year period ending immediately before they become members
of the group;
(ii) Bear the relationship described in section 1504(a)(1) to each
other through a loss subgroup parent immediately after they become
members of the current group; and
(iii) Have a net unrealized built-in loss (determined under
paragraph (g) of this section on the day they become members of the
group by treating that day as though it were a change date).
(3) Loss subgroup parent. A loss subgroup parent is the corporation
that bears the same relationship to the other members of the loss
subgroup as a common parent bears to the members of a group.
(4) Principal purpose of avoiding a limitation. The corporations
described in paragraph (d)(1) or (2) of this section do not compose a
loss subgroup if any one of them is formed, acquired, or availed of
with a principal purpose of avoiding the application of, or increasing
any limitation under, section 382. Instead, Sec. 1.1502-94T applies
with respect to the attributes of each such corporation. This paragraph
(d)(4) does not apply solely because, in connection with becoming
members of the group, the members of a group (or loss subgroup) are
rearranged to bear a relationship to the other members described in
section 1504(a)(1).
[[Page 33339]]
(5) Special rules. See Sec. 1.1502-95T(d) for rules concerning when
a corporation ceases to be a member of a loss subgroup. See also
Sec. 1.1502-96T(a) for a special rule regarding the end of separate
tracking of SRLY losses of a member that has an ownership change or
that has been a member of a group for at least 5 consecutive years.
(6) Examples. The following examples illustrate the principles of
this paragraph (d).
Example 1. Loss subgroup. (a) P owns all the L stock and L owns
all the L1 stock. The P group has a consolidated net operating loss
arising in Year 1 that is carried to Year 2. On May 2, Year 2, P
sells all the stock of L to A, and L and L1 thereafter file
consolidated returns. A portion of the Year 1 consolidated net
operating loss is apportioned under Sec. 1.1502-21T(b) to each of L
and L1, which they carry over to Year 2. The following is a graphic
illustration of these facts:
[GRAPHIC] [TIFF OMITTED] TR27JN96.003
(b) (1) L and L1 compose a loss subgroup within the meaning of
paragraph (d)(1) of this section because--
(i) They were affiliated with each other in the P group (the
former group);
(ii) They bear a relationship described in section 1504(a)(1) to
each other through a loss subgroup parent (L) immediately after they
became members of the L group; and
(iii) At least one of the members (here, both L and L1) carries
over a net operating loss to the L group (the current group) that
did not arise in a SRLY with respect to the P group.
(2) Under paragraph (d)(3) of this section, L is the loss
subgroup parent of the L loss subgroup.
Example 2. Loss subgroup--section 1504(a)(1) relationship. (a) P
owns all the stock of L and L1. L owns all the stock of L2. L1 and
L2 own 40 percent and 60 percent of the stock of L3, respectively.
The P group has a consolidated net operating loss arising in Year 1
that is carried over to Year 2. On May 22, Year 2, P sells all the
stock of L and L1 to P1, the common parent of another consolidated
group. The Year 1 consolidated net operating loss is apportioned
under Sec. 1.1502-21T(b), and each of L, L1, L2, and L3 carries over
a portion of such loss to the first consolidated return year of the
P1 group ending after the acquisition. The following is a graphic
illustration of these facts:
[[Page 33340]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.004
BILLING CODE 4830-01-C
(b) L and L2 compose a loss subgroup within the meaning of
paragraph (d)(1) of this section. Neither L1 nor L3 is included in a
loss subgroup because neither bears a relationship described in
section 1504(a)(1) through a loss subgroup parent to any other
member of the former group immediately after becoming members of the
P1 group.
Example 3. Loss subgroup--section 1504(a)(1) relationship. The
facts are the same as in Example 2, except that the stock of L1 is
transferred to L in connection with the sale of the L stock to P1.
L, L1, L2, and L3 compose a loss subgroup within the meaning of
paragraph (d)(1) of this section because--
(1) They were affiliated with each other in the P group (the
former group);
(2) They bear a relationship described in section 1504(a)(1) to
each other through a loss subgroup parent (L) immediately after they
become members of the P1 group; and
(3) At least one of the members (here, each of L, L1, L2, and
L3) carries over to the P1 group (the current group) a net operating
loss that did not arise in a SRLY with respect to the P group (the
former group).
(e) Pre-change consolidated attribute--(1) Defined. A pre-change
consolidated attribute of a loss group is--
(i) Any loss described in paragraph (c)(1) (i) or (ii) of this
section (relating to the definition of loss group) that is allocable to
the period ending on or before the change date; and
(ii) Any recognized built-in loss of the loss group.
(2) Example. The following example illustrates the principle of
this paragraph (e).
Example. Pre-change consolidated attribute. (a) The L group has
a consolidated net operating loss arising in Year 1 that is carried
over to Year 2. The L loss group has an ownership change at the
beginning of Year 2.
(b) The net operating loss carryover of the L loss group from
Year 1 is a pre-change consolidated attribute because the L group
was entitled to use the loss in Year 2, the loss did not arise in a
SRLY with respect to the L group, and therefore the loss was
described in paragraph (c)(1)(i) of this section. Under paragraph
(a) of this section, the amount of consolidated taxable income of
the L group for Year 2 that may be offset by this loss carryover may
not exceed the consolidated section 382 limitation of the L group
for that year. See Sec. 1.1502-93T for rules relating to the
computation of the consolidated section 382 limitation.
(f) Pre-change subgroup attribute--(1) Defined. A pre-change
subgroup attribute of a loss subgroup is--
[[Page 33341]]
(i) Any net operating loss carryover described in paragraph
(d)(1)(iii) of this section (relating to the definition of loss
subgroup); and
(ii) Any recognized built-in loss of the loss subgroup.
(2) Example. The following example illustrates the principle of
this paragraph (f).
Example. Pre-change subgroup attribute. (a) P is the common
parent of a consolidated group. P owns all the stock of L, and L
owns all the stock of L1. L2 is not a member of an affiliated group,
and has a net operating loss arising in Year 1 that is carried over
to Year 2. On December 11, Year 2, L1 acquires all the stock of L2,
causing an ownership change of L2. During Year 2, the P group has a
consolidated net operating loss that is carried over to Year 3. On
November 2, Year 3, M acquires all the L stock from P. M, L, L1, and
L2 thereafter file consolidated returns. All of the P group Year 2
consolidated net operating loss is apportioned under Sec. 1.1502-
21T(b) to L and L2, which they carry over to the M group.
(b)(1) L, L1, and L2 compose a loss subgroup because--
(i) They were affiliated with each other in the P group (the
former group);
(ii) They bore a relationship described in section 1504(a)(1) to
each other through a loss subgroup parent (L) immediately after they
became members of the L group; and
(iii) At least one of the members (here, both L and L2) carries
over a net operating loss to the M group (the current group) that is
described in paragraph (d)(1)(iii) of this section.
(2) For this purpose, L2's loss from Year 1 that was a SRLY loss
with respect to the P group (the former group) is treated as
described in paragraph (d)(1)(iii) of this section because of the
application of the principles of Sec. 1.1502-96T(a). See paragraph
(d)(5) of this section. M's acquisition results in an ownership
change of L, and therefore the L loss subgroup under Sec. 1.1502-
92T(a)(2). See Sec. 1.1502-93T for rules governing the computation
of the subgroup section 382 limitation.
(c) In the M group, L2's Year 1 loss continues to be subject to
a section 382 limitation resulting from the ownership change that
occurred on December 11, Year 2. See Sec. 1.1502-96T(c).
(g) Net unrealized built-in gain and loss--(1) In general. The
determination whether a consolidated group (or loss subgroup) has a net
unrealized built-in gain or loss under section 382(h)(3) is based on
the aggregate amount of the separately computed net unrealized built-in
gains or losses of each member that is included in the group (or loss
subgroup) under paragraph (g)(2) of this section, including items of
built-in income and deduction described in section 382(h)(6). Thus, for
example, amounts deferred under section 267, or under Sec. 1.1502-13
(other than amounts deferred with respect to the stock of a member (or
an intercompany obligation) included in the group (or loss subgroup)
under paragraph (g)(2) of this section) are built-in items. The
threshold requirement under section 382(h)(3)(B) applies on an
aggregate basis and not on a member-by-member basis. The separately
computed amount of a member included in a group or loss subgroup does
not include any unrealized built-in gain or loss on stock (including
stock described in section 1504(a)(4) and Sec. 1.382-2T(f)(18)(ii) and
(iii)) of another member included in the group or loss subgroup (or on
an intercompany obligation). However, a member of a group or loss
subgroup includes in its separately computed amount the unrealized
built-in gain or loss on stock of another member (or on an intercompany
obligation) not included in the group or loss subgroup. If a member is
not included in a group (or loss subgroup) under paragraph (g)(2) of
this section, the determination of whether the member has a net
unrealized built-in gain or loss under section 382(h)(3) is made on a
separate entity basis. See Sec. 1.1502-94(c) (relating to built-in gain
or loss of a new loss member) and Sec. 1.1502-96(a) (relating to the
end of separate tracking of certain losses).
(2) Members included--(i) Consolidated group. The members included
in the determination whether a consolidated group has a net unrealized
built-in gain or loss are all members of the group on the day that the
determination is made other than--
(A) A new loss member with a net unrealized built-in loss described
in Sec. 1.1502-94T(a)(1)(ii); and
(B) Members included in a loss subgroup described in Sec. 1.1502-
91T(d)(2).
(ii) Loss subgroup. The members included in the determination
whether a loss subgroup has a net unrealized built-in gain or loss are
those members described in paragraphs (d)(2)(i) and (ii) of this
section.
(3) Acquisitions of built-in gain or loss assets. A member of a
consolidated group (or loss subgroup) may not, in determining its
separately computed net unrealized built-in gain or loss, include any
gain or loss with respect to assets acquired with a principal purpose
to affect the amount of its net unrealized built-in gain or loss. A
group (or loss subgroup) may not, in determining its net unrealized
built-in gain or loss, include any gain or loss of a member acquired
with a principal purpose to affect the amount of its net unrealized
built-in gain or loss.
(4) Indirect ownership. A member's separately computed net
unrealized built-in gain or loss is adjusted to the extent necessary to
prevent any duplication of unrealized gain or loss attributable to the
member's indirect ownership interest in another member through a
nonmember if the member has a 5-percent or greater ownership interest
in the nonmember.
(h) Recognized built-in gain or loss--(1) In general. [Reserved]
(2) Disposition of stock or an intercompany obligation of a member.
Gain or loss recognized by a member on the disposition of stock
(including stock described in section 1504(a)(4) and Sec. 1.382-
2T(f)(18)(ii) and (iii)) of another member or an intercompany
obligation is treated as a recognized built-in gain or loss under
section 382(h)(2) (unless disallowed under Sec. 1.1502-20 or
otherwise), even though gain or loss on such stock or obligation was
not included in the determination of a net unrealized built-in gain or
loss under paragraph (g)(1) of this section.
(3) Deferred gain or loss. Gain or loss that is deferred under
provisions such as section 267 and Sec. 1.1502-13 is treated as
recognized built-in gain or loss only to the extent taken into account
by the group during the recognition period.
(4) Exchanged basis property. If the adjusted basis of any asset is
determined, directly or indirectly, in whole or in part, by reference
to the adjusted basis of another asset held by the member at the
beginning of the recognition period, the asset is treated, with
appropriate adjustments, as held by the member at the beginning of the
recognition period.
(i) [Reserved]
(j) Predecessor and successor corporations. A reference in this
section and Secs. 1.1502-92T through 1.1502-99T to a corporation,
member, common parent, loss subgroup parent, or subsidiary includes, as
the context may require, a reference to a predecessor or successor
corporation. For example, the determination whether a successor
satisfies the continuous affiliation requirement of paragraph (d)(2)(i)
of this section is made by reference to its predecessor.
Sec. 1.1502-92T Ownership change of a loss group or a loss subgroup
(temporary).
(a) Scope. This section provides rules for determining if there is
an ownership change for purposes of section 382 with respect to a loss
group or a loss subgroup. See Sec. 1.1502-94T for special rules for
determining if there is an ownership change with respect to a new loss
member and Sec. 1.1502-96T(b) for special rules for determining if
there is an ownership change of a subsidiary.
(b) Determination of an ownership change--(1) Parent change
method--(i)
[[Page 33342]]
Loss group. A loss group has an ownership change if the loss group's
common parent has an ownership change under section 382 and the
regulations thereunder. Solely for purposes of determining whether the
common parent has an ownership change--
(A) The losses described in Sec. 1.1502-91T(c) are treated as net
operating losses (or a net unrealized built-in loss) of the common
parent; and
(B) The common parent determines the earliest day that its testing
period can begin by reference to only the attributes that make the
group a loss group under Sec. 1.1502-91T(c).
(ii) Loss subgroup. A loss subgroup has an ownership change if the
loss subgroup parent has an ownership change under section 382 and the
regulations thereunder. The principles of Sec. 1.1502-95T(b) (relating
to ceasing to be a member of a consolidated group) apply in determining
whether the loss subgroup parent has an ownership change. Solely for
purposes of determining whether the loss subgroup parent has an
ownership change--
(A) The losses described in Sec. 1.1502-91T(d) are treated as net
operating losses (or a net unrealized built-in loss) of the loss
subgroup parent;
(B) The day that the members of the loss subgroup become members of
the group (or a loss subgroup) is treated as a testing date within the
meaning of Sec. 1.382-2(a)(4); and
(C) The loss subgroup parent determines the earliest day that its
testing period can begin under Sec. 1.382-2T(d)(3) by reference to only
the attributes that make the members a loss subgroup under Sec. 1.1502-
91T(d).
(2) Examples. The following examples illustrate the principles of
this paragraph (b).
Example 1. Loss group--ownership change of the common parent.
(a) A owns all the L stock. L owns 80 percent and B owns 20 percent
of the L1 stock. For Year 1, the L group has a consolidated net
operating loss that resulted from the operations of L1 and that is
carried over to Year 2. The value of the L stock is $1000. The total
value of the L1 stock is $600 and the value of the L1 stock held by
B is $120. The L group is a loss group under Sec. 1.1502-91T(c)(1)
because it is entitled to use its net operating loss carryover from
Year 1. On August 15, Year 2, A sells 51 percent of the L stock to
C. The following is a graphic illustration of these facts:
BILLING CODE 4830-01-U
[GRAPHIC] [TIFF OMITTED] TR27JN96.005
(b) Under paragraph (b)(1)(i) of this section, section 382 and
the regulations thereunder are applied to L to determine whether it
(and therefore the L loss group) has an ownership change with
respect to its net operating loss carryover from Year 1 attributable
to L1 on August 15, Year 2. The sale of the L stock to C causes an
ownership change of L under Sec. 1.382-2T and of the L loss group
under paragraph (b)(1)(i) of this section. The amount of
consolidated taxable income of the L loss group for any post-change
taxable year that may be offset by its pre-change consolidated
attributes (that is, the net operating loss carryover from Year 1
attributable to L1) may not exceed the consolidated section 382
limitation for the L loss group for the taxable year.
Example 2. Loss group--owner shifts of subsidiaries disregarded.
(a) The facts are the same as in Example 1, except that on August
15, Year 2, A sells only 49 percent of the L stock to C and, on
December 12, Year 3, in an unrelated transaction, B sells the 20
percent of the L1 stock to D. A's sale of the L stock to C does not
cause an ownership change of L under Sec. 1.382-2T nor of the L loss
group under paragraph (b)(1)(i) of this section. The following is a
graphic illustration of these facts:
[[Page 33343]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.006
(b) B's subsequent sale of L1 stock is not taken into account
for purposes of determining whether the L loss group has an
ownership change under paragraph (b)(1)(i) of this section, and,
accordingly, there is no ownership change of the L loss group. See
paragraph (c) of this section, however, for a supplemental ownership
change method that would apply to cause an ownership change if the
purchases by C and D were pursuant to a plan or arrangement.
Example 3. Loss subgroup--ownership change of loss subgroup
parent controls. (a) P owns all the L stock. L owns 80 percent and A
owns 20 percent of the L1 stock. The P group has a consolidated net
operating loss arising in Year 1 that is carried over to Year 2. On
September 9, Year 2, P sells 51 percent of the L stock to B, and L1
is apportioned a portion of the Year 1 consolidated net operating
loss under Sec. 1.1502-21T(b), which it carries over to its next
taxable year. L and L1 file a consolidated return for their first
taxable year ending after the sale to B. The following is a graphic
illustration of these facts:
[[Page 33344]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.007
(b) Under Sec. 1.1502-91T(d)(1), L and L1 compose a loss
subgroup on September 9, Year 2, the day that they become members of
the L group. Under paragraph (b)(1)(ii) of this section, section 382
and the regulations thereunder are applied to L to determine whether
it (and therefore the L loss subgroup) has an ownership change with
respect to the portion of the Year 1 consolidated net operating loss
that is apportioned to L1 on September 9, Year 2. L has an ownership
change resulting from P's sale of 51 percent of the L stock to A.
Therefore, the L loss subgroup has an ownership change with respect
to that loss.
Example 4. Loss group and loss subgroup--contemporaneous
ownership changes. (a) A owns all the stock of corporation M, M owns
35 percent and B owns 65 percent of the L stock, and L owns all the
L1 stock. The L group has a consolidated net operating loss arising
in Year 1 that is carried over to Year 2. On May 19, Year 2, B sells
45 percent of the L stock to M for cash. M, L, and L1 thereafter
file consolidated returns. L and L1 are each apportioned a portion
of the Year 1 consolidated net operating loss, which they carry over
to the M group's Year 2 and Year 3 consolidated return years. The M
group has a consolidated net operating loss arising in Year 2 that
is carried over to Year 3. On June 9, Year 3, A sells 70 percent of
the M stock to C. The following is a graphic illustration of these
facts:
[[Page 33345]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.008
(b) Under Sec. 1.1502-91T(d)(1), L and L1 compose a loss
subgroup on May 19, Year 2, the day they become members of the M
group. Under paragraph (b)(1)(ii) of this section, section 382 and
the regulations thereunder are applied to L to determine whether L
(and therefore the L loss subgroup) has an ownership change with
respect to the loss carryovers from Year 1 on May 19, Year 2, a
testing date because of B's sale of L stock to M. The sale of L
stock to M results in only a 45 percentage point increase in A's
ownership of L stock. Thus, there is no ownership change of L (or
the L loss subgroup) with respect to those loss carryovers under
paragraph (b)(1)(ii) of this section on that day.
(c) June 9, Year 3, is also a testing date with respect to the L
loss subgroup because of A's sale of M stock to C. The sale results
in a 56 percentage point increase in C's ownership of L stock, and L
has an ownership change. Therefore, the L loss subgroup has an
ownership change on that day with respect to the loss carryovers
from Year 1.
(d) Paragraph (b)(1)(i) of this section requires that section
382 and the regulations thereunder be applied to M to determine
whether M (and therefore the M loss group) has an ownership change
with respect to the net operating loss carryover from Year 2 on June
9, Year 3, a testing date because of A's sale of M stock to C. The
sale results in a 70 percentage point increase in C's ownership of M
stock, and M has an ownership change. Therefore, the M loss group
has an ownership change on that day with respect to that loss
carryover.
(3) Special adjustments--(i) Common parent succeeded by a new
common parent. For purposes of determining if a loss group has an
ownership change, if the common parent of a loss group is succeeded or
acquired by a new common parent and the loss group remains in
existence, the new common parent is treated as a continuation of the
former common parent with appropriate adjustments to take into account
shifts in ownership of the former common parent during the testing
period (including shifts that occur incident to the common parent's
becoming the former common parent).
(ii) Newly created loss subgroup parent. For purposes of
determining if a loss subgroup has an ownership change, if the member
that is the loss subgroup parent has not been the loss subgroup parent
for at least 3 years as of a testing date, appropriate adjustments must
be made to take into account owner shifts of members of the loss
subgroup so that the structure of the loss subgroup does not have the
effect of avoiding an ownership change under section 382. (See
paragraph (b)(3)(iii) Example 3 of this section.)
(iii) Examples. The following examples illustrate the principles of
this paragraph (b)(3).
Example 1. New common parent acquires old common parent. (a) A,
who owns all the L stock, sells 30 percent of the L stock to B on
August 26, Year 1. L owns all the L1 stock. The L group has a
consolidated net operating loss arising in Year 1 that is carried
over to Year 3. On July 16, Year 2, A and B transfer their L stock
to a newly created holding company, HC, in exchange for 70 percent
and 30 percent, respectively, of the HC stock. HC, L, and L1
thereafter file consolidated returns. Under the principles of
Sec. 1.1502-75(d), the L loss group is treated as remaining in
existence, with HC taking the place of L as the new common parent of
the loss group. The following is a graphic illustration of these
facts:
BILLING CODE 4830-01-U
[[Page 33346]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.009
BILLING CODE 4830-01-C
[[Page 33347]]
(b) On November 11, Year 3, A sells 25 percent of the HC stock
to B. For purposes of determining if the L loss group has an
ownership change under paragraph (b)(1)(i) of this section on
November 11, Year 3, HC is treated as a continuation of L under
paragraph (b)(3)(i) of this section because it acquired L and became
the common parent without terminating the L loss group. Accordingly,
HC's testing period commences on January 1, Year 1, the first day of
the taxable year of the L loss group in which the consolidated net
operating loss that is carried over to Year 3 arose (see Sec. 1.382-
2T(d)(3)(i)). Immediately after the close of November 11, Year 3,
B's percentage ownership interest in the common parent of the loss
group (HC) has increased by 55 percentage points over its lowest
percentage ownership during the testing period (zero percent).
Accordingly, HC and the L loss group have an ownership change on
that day.
Example 2. New common parent in case in which common parent
ceases to exist. (a) A, B, and C each own one-third of the L stock.
L owns all the L1 stock. The L group has a consolidated net
operating loss arising in Year 2 that is carried over to Year 3. On
November 22, Year 3, L is merged into P, a corporation owned by D,
and L1 thereafter files consolidated returns with P. A, B, and C, as
a result of owning stock of L, own 90 percent of P's stock after the
merger. D owns the remaining 10 percent of P's stock. The merger of
L into P qualifies as a reverse acquisition of the L group under
Sec. 1.1502-75(d)(3)(i), and the L loss group is treated as
remaining in existence, with P taking the place of L as the new
common parent of the L group. The following is a graphic
illustration of these facts:
BILLING CODE 4830-01-U
[GRAPHIC] [TIFF OMITTED] TR27JN96.010
(b) For purposes of determining if the L loss group has an
ownership change on November 22, Year 3, the day of the merger, P is
treated as a continuation of L so that the testing period for P
begins on January 1, Year 2, the first day of the taxable year of
the L loss group in which the consolidated net operating loss that
is carried over to Year 3 arose. Immediately after the close of
November 22, Year 3, D is the only 5-percent shareholder that has
increased his ownership interest in P during the testing period
(from zero to 10 percentage points).
(c) The facts are the same as in paragraph (a) of this Example
2, except that A has held 23\1/3\ shares (23\1/3\ percent) of L's
stock for five years, and A purchased an additional 10 shares of L
stock from E two years before the merger. Immediately after the
close of the day of the merger (a testing date), A's ownership
interest in P, the common parent of the L loss group, has increased
by 6\2/3\ percentage points over her lowest percentage ownership
during the testing period (23\1/3\ percent to 30 percent).
(d) The facts are the same as in (a) of this Example 2, except
that P has a net operating loss arising in Year 1 that is carried to
the first consolidated return year ending after the day of the
merger. Solely for purposes of determining whether the L loss group
has an ownership change under paragraph (b)(1)(i) of this section,
the testing period for P
[[Page 33348]]
commences on January 1, Year 2. P does not determine the earliest
day for its testing period by reference to its net operating loss
carryover from Year 1, which Secs. 1502-1(f)(3) and 1.1502-
75(d)(3)(i) treat as arising in a SRLY. See Sec. 1.1502-94T to
determine the application of section 382 with respect to P's net
operating loss carryover.
Example 3. Newly acquired loss subgroup parent. (a) P owns all
the L stock and L owns all the L1 stock. The P group has a
consolidated net operating loss arising in Year 1 that is carried
over to Year 3. On January 19, Year 2, L issues a 20 percent stock
interest to B. On February 5, Year 3, P contributes its L stock to a
newly formed subsidiary, HC, in exchange for all the HC stock, and
distributes the HC stock to its sole shareholder A. HC, L, and L1
thereafter file consolidated returns. A portion of the P group's
Year 1 consolidated net operating loss is apportioned to L and L1
under Sec. 1.1502-21T(b) and is carried over to the HC group's year
ending after February 5, Year 3. HC, L, and L1 compose a loss
subgroup within the meaning of Sec. 1.1502-91T(d) with respect to
the net operating loss carryovers from Year 1. The following is a
graphic illustration of these facts:
[GRAPHIC] [TIFF OMITTED] TR27JN96.011
BILLING CODE 4830-01-C
(b) February 5, Year 3, is a testing date for HC as the loss
subgroup parent with respect to the net operating loss carryovers of
L and L1 from Year 1. See paragraph (b)(1)(ii)(B) of this section.
For purposes of determining whether HC has an ownership change on
the testing date, appropriate adjustments must be made with respect
to the changes in the percentage ownership of the stock of HC
because HC was not the loss subgroup parent for at least 3 years
prior to the day on which it became a member of the HC loss subgroup
(a testing date). The appropriate adjustments include adjustments so
that HC succeeds to the owner shifts of other members of the former
group. Thus, HC succeeds to the owner shift of L that resulted from
the sale of the 20 percent interest to B in determining whether the
HC loss subgroup has an ownership change on February 5, Year 3, and
on any subsequent testing date that includes January 19, Year 2.
(4) End of separate tracking of certain losses. If Sec. 1.1502-
96T(a) (relating to the end of separate tracking of attributes) applies
to a loss subgroup, then, while one or more members that were included
in the loss subgroup remain members of the consolidated group, there is
an ownership change with respect to their attributes described in
Sec. 1.1502-96T(a)(2) only if the consolidated group is a loss group
and has an ownership change under paragraph (b)(1)(i) of this section
(or such a member has an ownership change under Sec. 1.1502-96T(b)
(relating to ownership changes of subsidiaries)). If, however, the loss
subgroup has had
[[Page 33349]]
an ownership change before Sec. 1.1502-96T(a) applies, see Sec. 1.1502-
96T(c) for the continuing application of the subgroup's section 382
limitation with respect to its pre-change subgroup attributes.
(c) Supplemental rules for determining ownership change--(1) Scope.
This paragraph (c) contains a supplemental rule for determining whether
there is an ownership change of a loss group (or loss subgroup). It
applies in addition to, and not instead of, the rules of paragraph (b)
of this section. Thus, for example, if the common parent of the loss
group has an ownership change under paragraph (b) of this section, the
loss group has an ownership change even if, by applying this paragraph
(c), the common parent would not have an ownership change.
(2) Cause for applying supplemental rule. This paragraph (c)
applies to a loss group (or loss subgroup) if--
(i) Any 5-percent shareholder of the common parent (or loss
subgroup parent) increases its percentage ownership interest in the
stock of both--
(A) A subsidiary of the loss group (or loss subgroup) other than by
a direct or indirect acquisition of stock of the common parent (or loss
subgroup parent); and
(B) The common parent (or loss subgroup parent); and
(ii) Those increases occur within a 3 year period ending on any day
of a consolidated return year or, if shorter, the period beginning on
the first day following the most recent ownership change of the loss
group (or loss subgroup).
(3) Operating rules. Solely for purposes of this paragraph (c)--
(i) A 5-percent shareholder of the common parent (or loss subgroup
parent) is treated as increasing its percentage ownership interest in
the common parent (or loss subgroup parent) or a subsidiary to the
extent, if any, that any person acting pursuant to a plan or
arrangement with the 5-percent shareholder increases its percentage
ownership interest in the stock of that entity;
(ii) The rules in section 382(l)(3) and Secs. 1.382-2T(h) and
1.382-4(d) (relating to constructive ownership) apply with respect to
the stock of the subsidiary by treating such stock as stock of a loss
corporation; and
(iii) In the case of a loss subgroup, a subsidiary includes any
member of the loss subgroup other than the loss subgroup parent. (The
loss subgroup parent is, however, a subsidiary of the loss group of
which it is a member.)
(4) Supplemental ownership change rules. The determination whether
the common parent (or loss subgroup parent) has an ownership change is
made by applying paragraph (b)(1) of this section as modified by the
following additional rules--
(i) Additional testing dates for the common parent (or loss
subgroup parent). A testing date for the common parent (or loss
subgroup parent) also includes--
(A) Each day on which there is an increase in the percentage
ownership of stock of a subsidiary as described in paragraph (c)(2) of
this section; and
(B) The first day of the first consolidated return year for which
the group is a loss group (or the members compose a loss subgroup);
(ii) Treatment of subsidiary stock as stock of the common parent
(or loss subgroup parent). The common parent (or loss subgroup parent)
is treated as though it had issued to the person acquiring (or deemed
to acquire) the subsidiary stock an amount of its own stock (by value)
that equals the value of the subsidiary stock represented by the
percentage increase in that person's ownership of the subsidiary
(determined on a separate entity basis). A similar principle applies if
the increase in percentage ownership interest is effected by a
redemption or similar transaction; and
(iii) 5-percent shareholder of the common parent (or loss subgroup
parent). Any person described in paragraph (c)(3)(i) of this section
who is acting pursuant to the plan or arrangement is treated as a 5-
percent shareholder of the common parent (or loss subgroup parent).
(5) Examples. The following examples illustrate the principles of
this paragraph (c).
Example 1. Stock of the common parent under supplemental rules.
(a) A owns all the L stock. L is not a member of an affiliated group
and has a net operating loss carryover arising in Year 1 that is
carried over to Year 6. On September 20, Year 6, L transfers all of
its assets and liabilities to a newly created subsidiary, S, in
exchange for S stock. L and S thereafter file consolidated returns.
On November 23, Year 6, B contributes cash to L in exchange for a 45
percent ownership interest in L and contributes cash to S for a 20
percent ownership interest in S.
(b) B is a 5-percent shareholder of L who increases his
percentage ownership interest in L and S during the 3 year period
ending on November 23, Year 6. Under paragraph (c)(4)(ii) of this
section, the determination whether L (the common parent of a loss
group) has an ownership change on November 23, Year 6 (or on any
testing date in the testing period which includes November 23, Year
6), is made by applying paragraph (b)(1)(i) of this section and by
treating the value of B's 20 percent ownership interest in S as if
it were L stock issued to B.
Example 2. Plan or arrangement--public offering of subsidiary
stock. (a) A owns all the stock of L and L owns all the stock of L1.
The L group has a consolidated net operating loss arising in Year 1
that resulted from the operations of L1 and that is carried over to
Year 2. As part of a plan, A sells 49 percent of the L stock to B on
October 7, Year 2, and L1 issues new stock representing a 20 percent
ownership interest in L1 to the public on November 6, Year 2. The
following is a graphic illustration of these facts:
BILLING CODE 4830-01-U
[[Page 33350]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.012
BILLING CODE 4830-01-C
(b) A's sale of the L stock to B does not cause an ownership
change of the L loss group on October 7, Year 2, under the rules of
Sec. 1.382-2T and paragraph (b)(1)(i) of this section.
(c) Because the issuance of L1 stock to the public occurs in
connection with B's acquisition of L stock pursuant to a plan,
paragraph (c)(4) of this section applies to determine whether the L
loss group has an ownership change on November 6, Year 2 (or on any
testing date for which the testing period includes November 6, Year
2).
(d) Testing period following ownership change under this section.
If a loss group (or a loss subgroup) has had an ownership change under
this section, the testing period for determining a subsequent ownership
change with respect to pre-change consolidated attributes (or pre-
change subgroup attributes) begins no earlier than the first day
following the loss group's (or loss subgroup's) most recent change
date.
(e) Information statements.--(1) Common parent of a loss group. The
common parent of a loss group must file the information statement
required by Sec. 1.382-2T(a)(2)(ii) for a consolidated return year
because of any owner shift, equity structure shift, or the issuance or
transfer of an option--
(i) With respect to the common parent and with respect to any
subsidiary stock subject to paragraph (c) of this section; and
(ii) With respect to an ownership change described in Sec. 1.1502-
96T(b) (relating to ownership changes of subsidiaries).
(2) Abbreviated statement with respect to loss subgroups. The
common parent of a consolidated group that has a loss subgroup during a
consolidated return year must file the information statement required
by Sec. 1.382-2T(a)(2)(ii) because of any owner shift, equity structure
shift, or issuance or transfer of an option with respect to the loss
subgroup parent and with respect to any subsidiary stock subject to
paragraph (c) of this section. Instead of filing a separate statement
for each loss subgroup parent, the common parent (which is treated as a
loss corporation) may file the single statement described in paragraph
(e)(1) of this section. In addition to the information concerning stock
ownership of the common parent, the single statement must identify each
loss subgroup parent and state which loss subgroups, if any, have had
ownership changes during the consolidated return year. The loss
subgroup parent is, however, still required to maintain the records
necessary to determine if the loss subgroup has an ownership change.
[[Page 33351]]
This paragraph (e)(2) applies with respect to the attributes of a loss
subgroup until, under Sec. 1.1502-96T(a), the attributes are no longer
treated as described in Sec. 1.1502-91T(d) (relating to the definition
of loss subgroup). After that time, the information statement described
in paragraph (e)(1) of this section must be filed with respect to those
attributes.
Sec. 1.1502-93T Consolidated section 382 limitation (or subgroup
section 382 limitation) (temporary).
(a) Determination of the consolidated section 382 limitation (or
subgroup section 382 limitation)--(1) In general. Following an
ownership change, the consolidated section 382 limitation (or subgroup
section 382 limitation) for any post-change year is an amount equal to
the value of the loss group (or loss subgroup), as defined in paragraph
(b) of this section, multiplied by the long-term tax-exempt rate that
applies with respect to the ownership change, and adjusted as required
by section 382 and the regulations thereunder. See, for example,
section 382(b)(2) (relating to the carryforward of unused section 382
limitation), section 382(b)(3)(B) (relating to the section 382
limitation for the post-change year that includes the change date),
section 382(m)(2) (relating to short taxable years), and section 382(h)
(relating to recognized built-in gains and section 338 gains).
(2) Coordination with apportionment rule. For special rules
relating to apportionment of a consolidated section 382 limitation (or
a subgroup section 382 limitation) when one or more corporations cease
to be members of a loss group (or a loss subgroup) and to aggregation
of amounts so apportioned, see Sec. 1.1502-95T(c).
(b) Value of the loss group (or loss subgroup)--(1) Stock value
immediately before ownership change. Subject to any adjustment under
paragraph (b)(2) of this section, the value of the loss group (or loss
subgroup) is the value, immediately before the ownership change, of the
stock of each member, other than stock that is owned directly or
indirectly by another member. For this purpose--
(i) Ownership is determined under Sec. 1.382-2T;
(ii) A member is considered to indirectly own stock of another
member through a nonmember only if the member has a 5-percent or
greater ownership interest in the nonmember; and
(iii) Stock includes stock described in section 1504(a)(4) and
Sec. 1.382-2T(f)(18)(ii) and (iii).
(2) Adjustment to value. The value of the loss group (or loss
subgroup), as determined under paragraph (b)(1) of this section, is
adjusted under any rule in section 382 or the regulations thereunder
requiring an adjustment to such value for purposes of computing the
amount of the section 382 limitation. See, for example, section
382(e)(2) (redemptions and corporate contractions), section 382(l)(1)
(certain capital contributions) and section 382(l)(4) (ownership of
substantial nonbusiness assets). The value of the loss group (or loss
subgroup) determined under this paragraph (b) is also adjusted to the
extent necessary to prevent any duplication of the value of the stock
of a member. For example, the principles of Sec. 1.382-8T (relating to
controlled groups of corporations) apply in determining the value of a
loss group (or loss subgroup) if, under Sec. 1.1502-91T(g)(2), members
are not included in the determination whether the group (or loss
subgroup) has a net unrealized built-in loss.
(3) Examples. The following examples illustrate the principles of
this paragraph (b).
Example 1. Basic case. (a) L, L1, and L2 compose a loss group. L
has outstanding common stock, the value of which is $100. L1 has
outstanding common stock and preferred stock that is described in
section 1504(a)(4). L owns 90 percent of the L1 common stock, and A
owns the remaining 10 percent of the L1 common stock plus all the
preferred stock. The value of the L1 common stock is $40, and the
value of the L1 preferred stock is $30. L2 has outstanding common
stock, 50 percent of which is owned by L and 50 percent by L1. The L
group has an ownership change. The following is a graphic
illustration of these facts:
BILLING CODE 4830-01-U
[GRAPHIC] [TIFF OMITTED] TR27JN96.013
(b) Under paragraph (b)(1) of this section, the L group does not
include the value of the stock of any member that is owned directly
or indirectly by another member in computing its consolidated
section 382 limitation. Accordingly, the value of the stock of the
loss group is $134, the sum of the value of--
(1) The common stock of L ($100);
(2) the 10 percent of the L1 common stock ($4) owned by A; and
(3) The L1 preferred stock ($30) owned by A.
Example 2. Indirect ownership. (a) L and L1 compose a
consolidated group. L's stock has a value of $100. L owns 80 shares
(worth $80) and corporation M owns 20 shares (worth $20) of the L1
stock. L also owns 79 percent of the stock of corporation M. The L
group has an ownership change. The following is a graphic
illustration of these facts:
[[Page 33352]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.014
BILLING CODE 4830-01-C
(b) Under paragraph (b)(1) of this section, because of L's more
than 5 percent ownership interest in M, a nonmember, L is considered
to indirectly own 15.8 shares of the L1 stock held by M (79% x 20
shares). The value of the L loss group is $104.20, the sum of the
values of--
(1) The L stock ($100); and
(2) The L1 stock not owned directly or indirectly by L (21% x
$20, or $4.20).
(c) Recognized built-in gain of a loss group or loss subgroup. If a
loss group (or loss subgroup) has a net unrealized built-in gain, any
recognized built-in gain of the loss group (or loss subgroup) is taken
into account under section 382(h) in determining the consolidated
section 382 limitation (or subgroup section 382 limitation).
(d) Continuity of business--(1) In general. A loss group (or a loss
subgroup) is treated as a single entity for purposes of determining
whether it satisfies the continuity of business enterprise requirement
of section 382(c)(1).
(2) Example. The following example illustrates the principle of
this paragraph (d).
Example. Continuity of business enterprise. L owns all the stock
of two subsidiaries, L1 and L2. The L group has an ownership change.
It has pre-change consolidated attributes attributable to L2. Each
of the members has historically conducted a separate line of
business. Each line of business is approximately equal in value. One
year after the ownership change, L discontinues its separate
business and the business of L2. The separate business of L1 is
continued for the remainder of the 2 year period following the
ownership change. The continuity of business enterprise requirement
of section 382(c)(1) is met even though the separate businesses of L
and L2 are discontinued.
(e) Limitations of losses under other rules. If a section 382
limitation for a post-change year exceeds the consolidated taxable
income that may be offset by pre-change attributes for any reason,
including the application of the limitation of Sec. 1.1502-21T(c), the
amount of the excess is carried forward under section 382(b)(2)
(relating to the carryforward of unused section 382 limitation).
Sec. 1.1502-94T Coordination with section 382 and the regulations
thereunder when a corporation becomes a member of a consolidated group
(temporary).
(a) Scope--(1) In general. This section applies section 382 and the
regulations thereunder to a corporation that is a new loss member of a
consolidated group. A corporation is a new loss member if it--
(i) Carries over a net operating loss that arose (or is treated
under Sec. 1.1502-21T(c) as arising) in a SRLY with respect to the
current group, and that is not described in Sec. 1.1502-91T(d)(1); or
(ii) Has a net unrealized built-in loss (determined under paragraph
(c) of this section on the day it becomes a member of the current group
by treating that day as a change date) that is not taken into account
under Sec. 1.1502-91T(d)(2) in determining whether two or more
corporations compose a loss subgroup.
(2) Successor corporation as new loss member. A new loss member
also includes any successor to a corporation that has a net operating
loss carryover arising in a SRLY and that is treated as remaining in
existence under Sec. 1.382-2(a)(1)(ii) following a transaction
described in section 381(a).
(3) Coordination in the case of a loss subgroup. For rules
regarding the determination of whether there is an ownership change of
a loss subgroup with respect to a net operating loss or a net
unrealized built-in loss described in Sec. 1.1502-91T(d) (relating to
the definition of loss subgroup) and the computation of a subgroup
section 382 limitation following such an ownership change, see
Secs. 1.1502-92T and 1.1502-93T.
(4) End of separate tracking of certain losses. If Sec. 1.1502-
96T(a) (relating to the end of separate tracking of attributes) applies
to a new loss member, then, while that member remains a member of the
consolidated group, there is an ownership change with respect to its
attributes described in Sec. 1.1502-96T(a)(2) only if the consolidated
group is a loss group and has an ownership change under Sec. 1.1502-
92T(b)(1)(i) (or that member has an ownership change under Sec. 1.1502-
96T(b) (relating to ownership changes of subsidiaries)). If, however,
the new loss member has had an ownership change before Sec. 1.1502-
96T(a) applies, see Sec. 1.1502-96T(c) for the continuing application
of the section 382 limitation with respect to the member's pre-change
losses.
(5) Cross-reference. See section 382(a) and Sec. 1.1502-96T(c) for
the continuing effect of an ownership change after a corporation
becomes or ceases to be a member.
(b) Application of section 382 to a new loss member--(1) In
general. Section 382 and the regulations thereunder apply to a new loss
member to determine, on a separate entity basis, whether and to what
extent a section 382 limitation applies to limit the amount of
consolidated taxable income that may be offset by the new loss member's
pre-change separate attributes. For example, if an ownership change
with respect to the new loss member occurs under section 382 and the
regulations thereunder, the amount of consolidated taxable income for
any post-change year that may be offset by the new loss member's pre-
change separate attributes shall not exceed the section 382 limitation
as determined separately under section 382(b) with respect to that
member for such year. If
[[Page 33353]]
the post-change year includes the change date, section 382(b)(3)(A) is
applied so that the section 382 limitation of the new loss member does
not apply to the portion of the taxable income for such year that is
allocable to the period in such year on or before the change date. See
generally Sec. 1.382-6 (relating to the allocation of income and loss).
(2) Adjustment to value. The value of the new loss member is
adjusted to the extent necessary to prevent any duplication of the
value of the stock of a member. For example, the principles of
Sec. 1.382-8T (relating to controlled groups of corporations) apply in
determining the value of a new loss member.
(3) Pre-change separate attribute defined. A pre-change separate
attribute of a new loss member is--
(i) Any net operating loss carryover of the new loss member
described in paragraph (a)(1) of this section; and
(ii) Any recognized built-in loss of the new loss member.
(4) Examples. The following examples illustrate the principles of
this paragraph (b).
Example 1. Basic case. (a) A and P each own 50 percent of the L
stock. On December 19, Year 6, P purchases 30 percent of the L stock
from A for cash. L has net operating losses arising in Year 1 and
Year 2 that it carries over to Year 6 and Year 7. The following is a
graphic illustration of these facts:
BILLING CODE 4830-01-U
[GRAPHIC] [TIFF OMITTED] TR27JN96.015
-(b) L is a new loss member because it has net operating loss
carryovers that arose in a SRLY with respect to the P group and L is
not a member of a loss subgroup under Sec. 1.1502-91T(d). Under
section 382 and the regulations thereunder, L is a loss corporation
on December 19, Year 6, that day is a testing date for L, and the
testing period for L commences on December 20, Year 3. -
(c) P's purchase of L stock does not cause an ownership change
of L on December 19, Year 6, with respect to the net operating loss
carryovers from Year 1 and Year 2 under section 382 and Sec. 1.382-
2T. The use of the loss carryovers, however, is subject to
limitation under Sec. 1.1502-21T(c). -
Example 2. Multiple new loss members. (a) The facts are the same
as in Example 1, and, on December 31, Year 6, L purchases all the
stock of L1 from B for cash. L1 has a net operating loss of $40
arising in Year 3 that it carries over to Year 7. The following is a
graphic illustration of these facts:
[[Page 33354]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.016
BILLING CODE 4830-01-C
(b) L1 is a new loss member because it has a net operating loss
carryover from Year 3 that arose in a SRLY with respect to the P
group and L1 is not a member of a loss subgroup under Sec. 1.1502-
91T(d)(1). -
(c) L's purchase of all the stock of L1 causes an ownership
change of L1 on December 31, Year 6, under section 382 and
Sec. 1.382-2T. Accordingly, a section 382 limitation based on the
value of the L1 stock immediately before the ownership change limits
the amount of consolidated taxable income of the P group for any
post-change year that may be offset by L1's loss from Year 3.
(d) L1's ownership change in connection with its becoming a
member of the P group is an ownership change described in
Sec. 1.1502-96T(a). Thus, starting on January 1, Year 7, the P group
no longer separately tracks owner shifts of the stock of L1 with
respect to L1's loss from Year 3. Instead, the P group is a loss
group because of such loss under Sec. 1.1502-91T(c). -
Example 3. Ownership changes of new loss members. (a) The facts
are the same as in Example 2, and, on April 30, Year 7, C purchases
all the stock of P for cash. -
(b) L is a new loss member on April 30, Year 7, because its Year
1 and Year 2 losses arose in SRLYs with respect to the P group and
it is not a member of a loss subgroup under Sec. 1.1502-91T(d)(1).
The testing period for L commences on May 1, Year 4. C's purchase of
all the P stock causes an ownership change of L on April 30, Year 7,
under section 382 and Sec. 1.382-2T with respect to its Year 1 and
Year 2 losses. Accordingly, a section 382 limitation based on the
value of the L stock immediately before the ownership change limits
the amount of consolidated taxable income of the P group for any
post-change year that may be offset by L's Year 1 and Year 2 losses.
The use of those carryovers is also subject to limitation under
Sec. 1.1502-21T(c). -
(c) The P group is a loss group on April 30, Year 7, because it
is entitled to use L1's loss from Year 3, and such loss is no longer
treated as a loss of a new loss member starting the day after L1's
ownership change on December 31, Year 6. See Secs. 1.1502-96T(a) and
1.1502-91T(c)(2). C's purchase of all the P stock causes an
ownership change of P, and therefore the P loss group, on April 30,
Year 7, with respect to L1's Year 3 loss. Accordingly, a
consolidated section 382 limitation based on the value of the P
stock immediately before the ownership change limits the amount of
consolidated taxable income of the P group for any post-change year
that may be offset by L1's Year 3 loss.
-(c) Built-in gains and losses. As the context may require, the
principles of Secs. 1.1502-91T(g) and (h) and 1.1502-93T(c) (relating
to built-in gains and losses) apply to a new loss member on a separate
entity basis. See Sec. 1.1502-91T(g)(3).
(d) Information statements. The common parent of a consolidated
group that has a new loss member subject to paragraph (b)(1) of this
section during a consolidated return year must file the information
statement required by Sec. 1.382-2T(a)(2)(ii) because of any owner
shift, equity structure shift, or issuance or transfer of an option
with
[[Page 33355]]
respect to the new loss member. Instead of filing a separate statement
for each new loss member the common parent may file a single statement
described in Sec. 1.382-2T(a)(2)(ii) with respect to the stock
ownership of the common parent (which is treated as a loss
corporation). In addition to the information concerning stock ownership
of the common parent, the single statement must identify each new loss
member and state which new loss members, if any, have had ownership
changes during the consolidated return year. The new loss member is,
however, required to maintain the records necessary to determine if it
has an ownership change. This paragraph (d) applies with respect to the
attributes of a new loss member until an event occurs which ends
separate tracking under Sec. 1.1502-96T(a). After that time, the
information statement described in Sec. 1.1502-92T(e)(1) must be filed
with respect to these attributes.
Sec. 1.1502-95T Rules on ceasing to be a member of a consolidated
group (or loss subgroup) (temporary).
(a) In general--(1) Consolidated group. This section provides rules
for applying section 382 on or after the day that a member ceases to be
a member of a consolidated group (or loss subgroup). The rules concern
how to determine whether an ownership change occurs with respect to
losses of the member, and how a consolidated section 382 limitation (or
subgroup section 382 limitation) is apportioned to the member. As the
context requires, a reference in this section to a loss group, a
member, or a corporation also includes a reference to a loss subgroup,
and a reference to a consolidated section 382 limitation also includes
a reference to a subgroup section 382 limitation.
(2) Election by common parent. Only the common parent (not the loss
subgroup parent) may make the election under paragraph (c) of this
section to apportion either a consolidated section 382 limitation or a
subgroup section 382 limitation.
(3) Coordination with Secs. 1.1502-91T through 1.1502-93T. For
rules regarding the determination of whether there is an ownership
change of a loss subgroup and the computation of a subgroup section 382
limitation following such an ownership change, see Secs. 1.1502-91T
through 1.1502-93T.
(b) Separate application of section 382 when a member leaves a
consolidated group--(1) In general. Except as provided in Secs. 1.1502-
91T through 1.1502-93T (relating to rules applicable to loss groups and
loss subgroups), section 382 and the regulations thereunder apply to a
corporation on a separate entity basis after it ceases to be a member
of a consolidated group (or loss subgroup). Solely for purposes of
determining whether a corporation has an ownership change--
(i) Any portion of a consolidated net operating loss that is
apportioned to the corporation under Sec. 1.1502-21T(b) is treated as a
net operating loss of the corporation beginning on the first day of the
taxable year in which the loss arose;
(ii) The testing period may include the period during which (or
before which) the corporation was a member of the group (or loss
subgroup); and
(iii) Except to the extent provided in Sec. 1.1502-20(g) (relating
to reattributed losses), the day it ceases to be a member of a
consolidated group is treated as a testing date of the corporation
within the meaning of Sec. 1.382-2(a)(4).
(2) Effect of a prior ownership change of the group. If a loss
group has had an ownership change under Sec. 1.1502-92T before a
corporation ceases to be a member of a consolidated group (the former
member)--
(i) Any pre-change consolidated attribute that is subject to a
consolidated section 382 limitation continues to be treated as a pre-
change loss with respect to the former member after the attribute is
apportioned to the former member;
(ii) The former member's section 382 limitation with respect to
such attribute is zero except to the extent the common parent
apportions under paragraph (c) of this section all or a part of the
consolidated section 382 limitation to the former member;
(iii) The testing period for determining a subsequent ownership
change with respect to such attribute begins no earlier than the first
day following the loss group's most recent change date; and
(iv) As generally provided under section 382, an ownership change
of the former member that occurs on or after the day it ceases to be a
member of a loss group may result in an additional, lesser limitation
amount with respect to such loss.
(3) Application in the case of a loss subgroup. If two or more
former members are included in the same loss subgroup immediately after
they cease to be members of a consolidated group, the principles of
paragraphs (b) and (c) of this section apply to the loss subgroup.
Therefore, for example, an apportionment by the common parent under
paragraph (c) of this section is made to the loss subgroup rather than
separately to its members. -
(4) Examples. The following examples illustrate the principles of
this paragraph (b).
-Example 1. Treatment of departing member as a separate
corporation throughout the testing period. (a) A owns all the L
stock. L owns all the stock of L1 and L2. The L group has a
consolidated net operating loss arising in Year 1 that is carried
over to Year 3. On January 12, Year 2, A sells 30 percent of the L
stock to B. On February 7, Year 3, L sells 40 percent of the L2
stock to C, and L2 ceases to be a member of the group. A portion of
the Year 1 consolidated net operating loss is apportioned to L2
under Sec. 1.1502-21T(b) and is carried to L2's first separate
return year, which ends December 31, Year 3. The following is a
graphic illustration of these facts:
BILLING CODE 4830-01-U
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[GRAPHIC] [TIFF OMITTED] TR27JN96.017
BILLING CODE 4830-01-C-
[[Page 33357]]
(b) Under paragraph (b)(1) of this section, L2 is a loss
corporation on February 7, Year 3. Under paragraph (b)(1)(iii) of
this section, February 7, Year 3, is a testing date. Under paragraph
(b)(1)(ii) of this section, the testing period for L2 with respect
to this testing date commences on January 1, Year 1, the first day
of the taxable year in which the portion of the consolidated net
operating loss apportioned to L2 arose. Therefore, in determining
whether L2 has an ownership change on February 7, Year 3, B's
purchase of 30 percent of the L stock and C's purchase of 40 percent
of the L2 stock are each owner shifts. L2 has an ownership change
under section 382(g) and Sec. 1.382-2T because B and C have
increased their ownership interests in L2 by 18 and 40 percentage
points, respectively, during the testing period. -
Example 2. Effect of prior ownership change of loss group. (a) L
owns all the L1 stock and L1 owns all the L2 stock. The L loss group
had an ownership change under Sec. 1.1502-92T in Year 2 with respect
to a consolidated net operating loss arising in Year 1 and carried
over to Year 2 and Year 3. The consolidated section 382 limitation
computed solely on the basis of the value of the stock of L is $100.
On December 31, Year 2, L1 sells 25 percent of the stock of L2 to B.
L2 is apportioned a portion of the Year 1 consolidated net operating
loss which it carries over to its first separate return year ending
after December 31, Year 2. L2's separate section 382 limitation with
respect to this loss is zero unless L elects to apportion all or a
part of the consolidated section 382 limitation to L2. (See
paragraph (c) of this section for rules regarding the apportionment
of a consolidated section 382 limitation.) L apportions $50 of the
consolidated section 382 limitation to L2. -
(b) On December 31, Year 3, L1 sells its remaining 75 percent
stock interest in L2 to C, resulting in an ownership change of L2.
L2's section 382 limitation computed on the change date with respect
to the value of its stock is $30. Accordingly, L2's section 382
limitation for post-change years ending after December 31, Year 3,
with respect to its pre-change losses, including the consolidated
net operating losses apportioned to it from the L group, is $30,
adjusted as required by section 382 and the regulations thereunder.
-(c) Apportionment of a consolidated section 382 limitation--(1) In
general. The common parent may elect to apportion all or any part of a
consolidated section 382 limitation to a former member (or loss
subgroup). See paragraph (e) of this section for the time and manner of
making the election to apportion.
(2) Amount of apportionment. The common parent may apportion all or
part of each element of the consolidated section 382 limitation
determined under Sec. 1.1502-93T. For this purpose, the consolidated
section 382 limitation consists of two elements--
(i) The value element, which is the element of the limitation
determined under section 382(b)(1) (relating to value multiplied by the
long-term tax-exempt rate) without regard to such adjustments as those
described in section 382(b)(2) (relating to the carryforward of unused
section 382 limitation), section 382(b)(3)(B) (relating to the section
382 limitation for the post-change year that includes the change date),
section 382(h) (relating to built-in gains and section 338 gains), and
section 382(m)(2) (relating to short taxable years); and
(ii) The adjustment element, which is so much (if any) of the
limitation for the taxable year during which the former member ceases
to be a member of the consolidated group that is attributable to a
carryover of unused limitation under section 382(b)(2) or to recognized
built-in gains under 382(h).
(3) Effect of apportionment on the consolidated section 382
limitation. The value element of the consolidated section 382
limitation for any post-change year ending after the day that a former
member (or loss subgroup) ceases to be a member(s) is reduced to the
extent that it is apportioned under this paragraph (c). The
consolidated section 382 limitation for the post-change year in which
the former member (or loss subgroup) ceases to be a member(s) is also
reduced to the extent that the adjustment element for that year is
apportioned under this paragraph (c).
(4) Effect on corporations to which the consolidated section 382
limitation is apportioned. The amount of the value element that is
apportioned to a former member (or loss subgroup) is treated as the
amount determined under section 382(b)(1) for purposes of determining
the amount of that corporation's (or loss subgroup's) section 382
limitation for any taxable year ending after the former member (or loss
subgroup) ceases to be a member(s). Appropriate adjustments must be
made to the limitation based on the value element so apportioned for a
short taxable year, carryforward of unused limitation, or any other
adjustment required under section 382. The adjustment element
apportioned to a former member (or loss subgroup) is treated as an
adjustment under section 382(b)(2) or section 382(h), as appropriate,
for the first taxable year after the member (or members) ceases to be a
member (or members).
(5) Deemed apportionment when loss group terminates. If a loss
group terminates, to the extent the consolidated section 382 limitation
is not apportioned under paragraph (c)(1) of this section, the
consolidated section 382 limitation is deemed to be apportioned to the
loss subgroup that includes the common parent, or, if there is no loss
subgroup that includes the common parent immediately after the loss
group terminates, to the common parent. A loss group terminates on the
first day of the first taxable year that is a separate return year with
respect to each member of the former loss group.
(6) Appropriate adjustments when former member leaves during the
year. Appropriate adjustments are made to the consolidated section 382
limitation for the consolidated return year during which the former
member (or loss subgroup) ceases to be a member(s) to reflect the
inclusion of the former member in the loss group for a portion of that
year.
(7) Examples. The following examples illustrate the principles of
this paragraph (c).
Example 1. Consequence of apportionment. (a) L owns all the L1
stock and L1 owns all the L2 stock. The L group has a $200
consolidated net operating loss arising in Year 1 that is carried
over to Year 2. At the close of December 31, Year 1, the group has
an ownership change under Sec. 1.1502-92T. The ownership change
results in a consolidated section 382 limitation of $10 based on the
value of the stock of the group. On August 29, Year 2, L1 sells 30
percent of the stock of L2 to A. L2 is apportioned $90 of the
group's $200 consolidated net operating loss under Sec. 1.1502-
21T(b). L, the common parent, elects to apportion $6 of the
consolidated section 382 limitation to L2. The following is a
graphic illustration of these facts:
BILLING CODE 4830-01-U
[[Page 33358]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.018
(b) For its separate return years ending after August 29, Year 2
(other than the taxable year ending December 31, Year 2), L2's
section 382 limitation with respect to the $90 of the group's net
operating loss apportioned to it is $6, adjusted, as appropriate,
for any short taxable year, unused section 382 limitation, or other
adjustment. For its consolidated return years ending after August
29, Year 2, (other than the year ending December 31, Year 2) the L
group's consolidated section 382 limitation with respect to the
remaining $110 of pre-change consolidated attribute is $4 ($10 minus
the $6 value element apportioned to L2), adjusted, as appropriate,
for any short taxable year, unused section 382 limitation, or other
adjustment.
(c) For the L group's consolidated return year ending December
31, Year 2, the value element of its consolidated section 382
limitation is increased by $4 (rounded to the nearest dollar), to
account for the period during which L2 was a member of the L group
($6, the consolidated section 382 limitation apportioned to L2,
times 241/365, the ratio of the number of days during Year 2 that L2
is a member of the group to the number of days in the group's
consolidated return year). See paragraph (c)(6) of this section.
Therefore, the value element of the consolidated section 382
limitation for Year 2 of the L group is $8 (rounded to the nearest
dollar).
(d) The section 382 limitation for L2's short taxable year
ending December 31, Year 2, is $2 (rounded to the nearest dollar),
which is the amount that bears the same relationship to $6, the
value element of the consolidated section 382 limitation apportioned
to L2, as the number of days during that short taxable year, 124
days, bears to 365. See Sec. 1.382-4(c).
Example 2. Consequence of no apportionment. The facts are the
same as in Example 1, except that L does not elect to apportion any
portion of the consolidated section 382 limitation to L2. For its
separate return years ending after August 29, Year 2, L2's section
382 limitation with respect to the $90 of the group's pre-change
consolidated attribute apportioned to L2 is zero under paragraph
(b)(2)(ii) of this section. Thus, the $90 consolidated net operating
loss apportioned to L2 cannot offset L2's taxable income in any of
its separate return years ending after August 29, Year 2. For its
consolidated return years ending after August 29, Year 2, the L
group's consolidated section 382 limitation with respect to the
remaining $110 of pre-change consolidated attribute is $10,
adjusted, as appropriate, for any short taxable year, unused section
382 limitation, or other adjustment.
Example 3. Apportionment of adjustment element. The facts are
the same as in Example 1, except that L2 ceases to be a member of
the L group on August 29, Year 3, and the L group has a $4
carryforward of an unused consolidated section 382 limitation (under
section 382(b)(2)) to the 1993 consolidated return year.
The carryover of unused limitation increases the consolidated
section 382 limitation for the Year 3 consolidated return year from
$10 to $14. L may elect to apportion all or any portion of the $10
value element and all or any portion of the $4 adjustment element to
L2.
(d) Rules pertaining to ceasing to be a member of a loss subgroup--
(1) In general. A corporation ceases to be a member of a loss
subgroup--
(i) On the first day of the first taxable year for which it files a
separate return; or
(ii) The first day that it ceases to bear a relationship described
in section 1504(a)(1) to the loss subgroup parent (treating for this
purpose the loss subgroup parent as the common parent described in
section 1504(a)(1)(A)).
(2) Examples. The principles of this paragraph (d) are illustrated
by the following examples.
Example 1. Basic case. (a) P owns all the L stock, L owns all
the L1 stock and L1 owns all the L2 stock. The P group has a
consolidated net operating loss arising in Year 1 that is carried
over to Year 2. On December 11, Year 2, P sells all the stock of L
to corporation M. Each of L, L1, and L2 is apportioned a portion of
the Year 1 consolidated net operating loss, and thereafter each
joins with M in filing consolidated returns. Under Sec. 1.1502-92T,
the L loss subgroup has an ownership change on December 11, Year 2.
The L loss subgroup has a subgroup section 382 limitation of $100.
The following is a graphic illustration of these facts:
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[[Page 33359]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.019
BILLING CODE 4830-01-C
[[Page 33360]]
(b) On May 22, Year 3, L1 sells 40 percent of the L2 stock to A.
L2 carries over a portion of the P group's net operating loss from
Year 1 to its separate return year ending December 31, Year 3. Under
paragraph (d)(1) of this section, L2 ceases to be a member of the L
loss subgroup on May 22, Year 3, which is both (1) the first day of
the first taxable year for which it files a separate return and (2)
the day it ceases to bear a relationship described in section
1504(a)(1) to the loss subgroup parent, L. The net operating loss of
L2 that is carried over from the P group is treated as a pre-change
loss of L2 for its separate return years ending after May 22, Year
3. Under paragraphs (a)(2) and (b)(2) of this section, the separate
section 382 limitation with respect to this loss is zero unless M
elects to apportion all or a part of the subgroup section 382
limitation of the L loss subgroup to L2.
Example 2. Formation of a new loss subgroup. The facts are the
same as in Example 1, except that A purchases 40 percent of the L1
stock from L rather than purchasing L2 stock from L1. L1 and L2 file
a consolidated return for their first taxable year ending after May
22, Year 3, and each of L1 and L2 carries over a part of the net
operating loss of the P group that arose in Year 1. Under paragraph
(d)(1) of this section, L1 and L2 cease to be members of the L loss
subgroup on May 22, Year 3. The net operating losses carried over
from the P group are treated as pre-change subgroup attributes of
the loss subgroup composed of L1 and L2. The subgroup section 382
limitation with respect to those losses is zero unless M elects to
apportion all or part of the subgroup section 382 limitation of the
L loss subgroup to the L1 loss subgroup. The following is a graphic
illustration of these facts:
BILLING CODE 4830-01-U
[GRAPHIC] [TIFF OMITTED] TR27JN96.020
Example 3. Ceasing to bear a section 1504(a)(1) relationship to
a loss subgroup parent. (a) A owns all the stock of P, and P owns
all the stock of L1 and L2. The P group has a consolidated net
operating loss arising in Year 1 that is carried over to Year 3 and
Year 4. Corporation M acquires all the stock of P on November 11,
Year 3, and P, L1, and L2 thereafter file consolidated returns with
M. M's acquisition results in an ownership change of the P loss
subgroup under Sec. 1.1502-92T(b)(1)(ii). The following is a graphic
illustration of these facts:
BILLING CODE 4830-01-U
[[Page 33361]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.021
BILLING CODE 4830-01-C
[[Page 33362]]
(b) P distributes the L2 stock to M on October 7, Year 4. L2
ceases to be a member of the P loss subgroup on October 7, Year 4,
the first day that it ceases to bear the relationship described in
section 1504(a)(1) to P, the P loss subgroup parent. See paragraph
(d)(1)(ii) of this section. Thus, the section 382 limitation with
respect to the pre-change subgroup attributes attributable to L2 is
zero except to the extent M elects to apportion all or a part of the
subgroup section 382 limitation of the P loss subgroup to L2.
Example 4. Relationship through a successor. The facts are the
same as in Example 3, except that, instead of P's distributing the
stock of L2, L2 merges into L1 on October 7, Year 4. L1 (as
successor to L2 in the merger within the meaning of Sec. 1.382-
2T(f)(4)) continues to bear a relationship described in section
1504(a)(1) to P, the loss subgroup parent. Thus, L2 does not cease
to be a member of the P loss subgroup as a result of the merger.
(e) Filing the election to apportion--(1) Form of the election to
apportion. An election under paragraph (c) of this section must be made
by the common parent. The election must be made in the form of the
following statement: ``THIS IS AN ELECTION UNDER Sec. 1.1502-95T OF THE
INCOME TAX REGULATIONS TO APPORTION ALL OR PART OF THE [insert either
CONSOLIDATED SECTION 382 LIMITATION or SUBGROUP SECTION 382 LIMITATION,
as appropriate] TO [insert name and E.I.N. of the corporation (or the
corporations that compose a new loss subgroup) to which allocation is
made]. The declaration must also include the following information, as
appropriate--
(i) The date of the ownership change that resulted in the
consolidated section 382 limitation (or subgroup section 382
limitation);
(ii) The amount of the consolidated section 382 limitation (or
subgroup section 382 limitation) for the taxable year during which the
former member (or new loss subgroup) ceases to be a member of the
consolidated group (determined without regard to any apportionment
under this section;
(iii) The amount of the value element and adjustment element of the
consolidated section 382 limitation (or subgroup section 382
limitation) that is apportioned to the former member (or new loss
subgroup) pursuant to paragraph (c) of this section; and
(iv) The name and E.I.N. of the common parent making the
apportionment.
(2) Signing of the election. The election statement must be signed
by both the common parent and the former member (or, in the case of a
loss subgroup, the common parent and the loss subgroup parent) by
persons authorized to sign their respective income tax returns.
(3) Filing of the election. The election statement must be filed by
the common parent of the group that is apportioning the consolidated
section 382 limitation (or the subgroup section 382 limitation) with
its income tax return for the taxable year in which the former member
(or new loss subgroup) ceases to be a member. The common parent must
also deliver a copy of the statement to the former member (or the
members of the new loss subgroup) on or before the day the group files
its income tax return for the consolidated return year that the former
member (or new loss subgroup) ceases to be a member. A copy of the
statement must be attached to the first return of the former member (or
the first return in which the members of a new loss subgroup join) that
is filed after the close of the consolidated return year of the group
of which the former member (or the members of a new loss subgroup)
ceases to be a member.
(4) Revocation of election. An election statement made under
paragraph (c) of this section is revocable only with the consent of the
Commissioner.
Sec. 1.1502-96T Miscellaneous rules (temporary).
(a) End of separate tracking of losses--(1) Application. This
paragraph (a) applies to a member (or a loss subgroup) with a net
operating loss carryover that arose (or is treated under Sec. 1.1502-
21T(c) as arising) in a SRLY (or a net unrealized built-in gain or loss
determined at the time that the member (or loss subgroup) becomes a
member of the consolidated group if there is--
(i) An ownership change of the member (or loss subgroup in
connection with, or after, becoming a member of the group; or
(ii) A period of 5 consecutive years following the day that the
member (or loss subgroup) becomes a member of a group during which the
member (or loss subgroup) has not had an ownership change.
(2) Effect of end of separate tracking. If this paragraph (a)
applies with respect to a member (or loss subgroup), then, starting on
the day after the earlier of the change date (but not earlier than the
day the member (or loss subgroup) becomes a member of the consolidated
group) or the last day of the 5 consecutive year period described in
paragraph (a)(1)(ii) of this section, the member's net operating loss
carryover that arose (or is treated under Sec. 1.1502-21T(c) as
arising) in a SRLY, is treated as described in Sec. 1.1502-
91T(c)(1)(i). Also, the member's separately computed net unrealized
built-in gain or loss is included in the determination whether the
group has a net unrealized built-in gain or loss. The preceding
sentences also apply for purposes of determining whether there is an
ownership change with respect to such attributes following such change
date (or earlier day) or 5 consecutive year period. Thus, for example,
starting the day after the change date or the end of the 5 consecutive
year period--
(i) The consolidated group which includes the new loss member or
loss subgroup is no longer required to separately track owner shifts of
the stock of the new loss member or loss subgroup parent to determine
if an ownership change occurs with respect to the attributes of the new
loss member or members included in the loss subgroup;
(ii) The group includes the member's attributes in determining
whether it is a loss group under Sec. 1.1502-91T(c);
(iii) There is an ownership change with respect to such attributes
only if the group is a loss group and has an ownership change; and
(iv) If the group has an ownership change, such attributes are pre-
change consolidated attributes subject to the loss group's consolidated
section 382 limitation.
(3) Continuing effect of end of separate tracking. As the context
may require, a current group determines which of its members are
included in a loss subgroup on any testing date by taking into account
the application of this section in the former group. See the example in
Sec. 1.1502-91T(f)(2).
(4) Special rule for testing period. For purposes of determining
the beginning of the testing period for a loss group, the member's (or
loss subgroup's) net operating loss carryovers (or net unrealized
built-in gain or loss) described in paragraph (a)(2) of this section
are considered to arise--
-(i) in a case described in paragraph (a)(1)(i) of this section, in
a taxable year that begins not earlier than the later of the day
following the change date or the day that the member becomes a member
of the group; and -(ii) in a case described in paragraph (a)(1)(ii) of
this section, in a taxable year that begins 3 years before the end of
the 5 consecutive year period.
(5) Limits on effects of end of separate tracking. The rule
contained in this paragraph (a) applies solely for purposes of
Secs. 1.1502-91T through 1.1502-95T and this section (other than
paragraph (b)(2)(ii)(B) of this section (relating to the definition of
pre-change attributes of a subsidiary)) and Sec. 1.1502-98T, and not
for purposes of other provisions of the consolidated return
regulations,
[[Page 33363]]
including, for example, Secs. 1.1502-15T and 1.1502-21T (relating to
the consolidated net operating loss deduction). See also paragraph (c)
of this section for the continuing effect of an ownership change with
respect to pre-change attributes.
-(b) Ownership change of subsidiary--(1) Ownership change of a
subsidiary because of options or plan or arrangement. Notwithstanding
Sec. 1.1502-92T, a subsidiary may have an ownership change for purposes
of section 382 with respect to its attributes which a group or loss
subgroup includes in making a determination under Sec. 1.1502-91T(c)(1)
(relating to the definition of loss group) or Sec. 1.1502-91T(d)
(relating to the definition of loss subgroup). The subsidiary has such
an ownership change if it has an ownership change under the principles
of Sec. 1.1502-95T(b) and section 382 and the regulations thereunder
(determined on a separate entity basis by treating the subsidiary as
not being a member of a consolidated group) in the event of--
(i) The deemed exercise under Sec. 1.382-4(d) of an option or
options (other than an option with respect to stock of the common
parent) held by a person (or persons acting pursuant to a plan or
arrangement) to acquire more than 20 percent of the stock of the
subsidiary; or
(ii) An increase by 1 or more 5-percent shareholders, acting
pursuant to a plan or arrangement to avoid an ownership change of a
subsidiary, in their percentage ownership interest in the subsidiary by
more than 50 percentage points during the testing period of the
subsidiary through the acquisition (or deemed acquisition pursuant to
Sec. 1.382-4(d)) of ownership interests in the subsidiary and in
higher-tier members with respect to the subsidiary.
(2) Effect of the ownership change--(i) In general. If a subsidiary
has an ownership change under paragraph (b)(1) of this section, the
amount of consolidated taxable income for any post-change year that may
be offset by the pre-change losses of the subsidiary shall not exceed
the section 382 limitation for the subsidiary. For purposes of this
limitation, the value of the subsidiary is determined solely by
reference to the value of the subsidiary's stock.
(ii) Pre-change losses. The pre-change losses of a subsidiary are--
(A) Its allocable part of any consolidated net operating loss which
is attributable to it under Sec. 1.1502-21T(b) (determined on the last
day of the consolidated return year that includes the change date) that
is not carried back and absorbed in a taxable year prior to the year
including the change date;
(B) Its net operating loss carryovers that arose (or are treated
under Sec. 1.1502-21T(c) as having arisen) in a SRLY; and
(C) Its recognized built-in loss with respect to its separately
computed net unrealized built-in loss, if any, determined on the change
date.
(3) Coordination with Secs. 1.1502-91T, 1.1502-92T, and 1.1502-94T.
If an increase in percentage ownership interest causes an ownership
change with respect to an attribute under this paragraph (b) and under
Sec. 1.1502-92T on the same day, the ownership change is considered to
occur only under Sec. 1.1502-92T and not under this paragraph (b). See
Sec. 1.1502-94T for anti-duplication rules relating to value.
(4) Example. The following example illustrates paragraph (b)(1)(ii)
of this section.
Example. Plan to avoid an ownership change of a subsidiary. (a)
L owns all the stock of L1, L1 owns all the stock of L2, L2 owns all
the stock of L3, and L3 owns all the stock of L4. The L group has a
consolidated net operating loss arising in Year 1 that is carried
over to Year 2. L has assets other than its L1 stock with a value of
$900. L1, L2, and L3 own no assets other than their L2, L3, and L4
stock. L4 has assets with a value of $100. During Year 2, A, B, C,
and D, acting pursuant to a plan to avoid an ownership change of L4,
acquire the following ownership interests in the members of the L
loss group: (A) on September 11, Year 2, A acquires 20 percent of
the L1 stock from L and B acquires 20 percent of the L2 stock from
L1; and (B) on September 20, Year 2, C acquires 20 percent of the
stock of L3 from L2 and D acquires 20 percent of the stock of L4
from L3. The following is a graphic illustration of these facts:
BILLING CODE 4830-01-U
[[Page 33364]]
[GRAPHIC] [TIFF OMITTED] TR27JN96.022
BILLING CODE 4830-01-C
-(b) The acquisitions by A, B, C, and D pursuant to the plan
have increased their respective percentage ownership interests in L4
by approximately 10, 13, 16, and 20 percentage points, for a total
of approximately 59 percentage points during the testing period.
This more than 50 percentage point increase in the percentage
ownership interest in L4 causes an ownership change of L4 under
paragraph (b)(2) of this section.
-(c) Continuing effect of an ownership change. A loss corporation
(or loss subgroup) that is subject to a limitation under section 382
with respect to its pre-change losses continues to be subject to the
limitation regardless of whether it becomes a member or ceases to be a
member of a consolidated group. See Sec. 1.382-5T(d) (relating to
successive ownership changes and absorption of a section 382
limitation).
Sec. 1.1502-97T Special rules under section 382 for members under the
jurisdiction of a court in a title 11 or similar case (temporary).
[Reserved]
Sec. 1.1502-98T Coordination with section 383 (temporary).
-The rules contained in Secs. 1.1502-91T through 1.1502-96T also
apply for purposes of section 383, with appropriate adjustments to
reflect that section 383 applies to credits and net capital losses.
Similarly, in the case of net capital losses, general business credits,
and excess foreign taxes that are pre-change attributes, Sec. 1.383-1
applies the principles of Secs. 1.1502-91T through 1.1502-96T. For
example, if a loss group has an ownership change under Sec. 1.1502-92T
and has a carryover of unused general business credits from a pre-
change consolidated return year to a post-change consolidated return
year, the amount of the group's regular tax liability for the post-
change year that can be offset by the carryover cannot exceed the
consolidated section 383 credit limitation for that post-change year,
determined by applying the principles of Secs. 1.383-1(c)(6) and
1.1502-93T (relating to the computation of the consolidated section 382
limitation).
Sec. 1.1502-99T Effective dates (temporary).
-(a) Effective date. Sections 1.1502-91T through 1.1502-96T and
1.1502-98T apply to any testing date on or after January 1, 1997.
Sections 1.1502-94T through 1.1502-96T also apply on any date on or
after January 1, 1997, on which a corporation becomes a member of a
group or on which a corporation ceases to be a member of a loss group
(or a loss subgroup).
[[Page 33365]]
-(b) Testing period may include a period beginning before January
1, 1997. A testing period for purposes of Secs. 1.1502-91T through
1.1502-96T and 1.1502-98T may include a period beginning before January
1, 1997. Thus, for example, in applying Sec. 1.1502-92T(b)(1)(i)
(relating to the determination of an ownership change of a loss group),
the determination of the lowest percentage ownership interest of any 5-
percent shareholder of the common parent during a testing period ending
on a testing date occurring on or after January 1, 1997, takes into
account the period beginning before January 1, 1997, except to the
extent that the period is more than 3 years before the testing date or
is otherwise before the beginning of the testing period. See
Sec. 1.1502-92T(b)(1).
(c) Transition rules--(1) Methods permitted--(i) In general. For
the period ending before January 1, 1997, a consolidated group is
permitted to use any method described in paragraph (c)(2) of this
section which is consistently applied to determine if an ownership
change occurred with respect to a consolidated net operating loss, a
net operating loss carryover (including net operating loss carryovers
arising in SRLYs), or a net unrealized built-in loss. If an ownership
change occurred during that period, the group is also permitted to use
any method described in paragraph (c)(2) of this section which is
consistently applied to compute the amount of the section 382
limitation that applies to limit the use of taxable income in any post-
change year ending before, on, or after January 1, 1997. The preceding
sentence does not preclude the imposition of an additional, lesser
limitation due to a subsequent ownership change nor, except as provided
in paragraph (c)(1)(iii) of this section, does it permit the beginning
of a new testing period for the loss group.
-(ii) Adjustments to offset excess limitation. If an ownership
change occurred during the period ending before January 1, 1997, and a
method described in paragraph (c)(2) of this section was not used for a
post-change year, the members (or group) must reduce the section 382
limitation for post-change years for which an income tax return is
filed after January 1, 1997, to offset, as quickly as possible, the
effects of any section 382 limitation that members took into account in
excess of the amount that would have been allowable under Secs. 1.1502-
91T through 1.1502-96T and 1.1502-98T.
-(iii) Coordination with effective date. Notwithstanding that a
group may have used a method described in paragraph (c)(2)(ii) or (iii)
of this section for the period before January 1, 1997, Secs. 1.1502-91T
through 1.1502-96T and 1.1502-98T apply to any testing date occurring
on or after January 1, 1997, for purposes of determining whether there
is an ownership change with respect to any losses and, if so, the
collateral consequences. Any ownership change of a member other than
the common parent pursuant to a method described in paragraph
(c)(2)(ii) or (iii) of this section does not cause a new testing period
of the loss group to begin for purposes of applying Sec. 1.1502-92T on
or after January 1, 1997.
-(2) Permitted methods. The methods described in this paragraph
(c)(2) are:
-(i) A method that does not materially differ from the rules in
Secs. 1.1502-91T through 1.1502-96T and 1.1502-98T (other than those in
Sec. 1.1502-95T(c) (relating to the apportionment of a section 382
limitation) as they would apply to a corporation that ceases to be a
member of the group before January 1, 1997). As the context requires,
the method must treat references to rules in current regulations as
references to rules in regulations generally effective for taxable
years before January 1, 1997. Thus, for example, the taxpayer must
treat a reference to Sec. 1.382-4(d) (relating to options) as a
reference to Sec. 1.382-2T(h)(4) for any testing date to which
Sec. 1.382-2T(h)(4) applies. Similarly, a reference to Sec. 1.1502-
21T(c) may be a reference to Sec. 1.1502-21A(c), as appropriate.
Furthermore, the method must treat all corporations that were
affiliated on January 1, 1987, and continuously thereafter as having
met the 5 consecutive year requirement of Sec. 1.1502-91T(d)(2)(i) on
any day before January 1, 1992, on which the determination of net
unrealized built-in gain or loss of a loss subgroup is made;
-(ii) A reasonable application of the rules in section 382 and the
regulations thereunder applied to each member on a separate entity
basis, treating each member's allocable part of a consolidated net
operating loss which is attributable to it under Sec. 1.1502-21T(b) as
a net operating loss of that member and applying rules similar to
Sec. 1.382-8T to avoid duplication of value in computing the section
382 limitation for the member (see Sec. 1.382-8T(h) (relating to the
effective date and transition rules regarding controlled groups)); or
-(iii) A method approved by the Commissioner upon application by
the common parent.
-(d) Amended returns. A group may file an amended return in
connection with an ownership change occurring before January 1, 1997,
to modify the amount of a section 382 limitation with respect to a
consolidated net operating loss, a net operating loss carryover
(including net operating loss carryovers arising in SRLYs), or a
recognized built-in loss (or gain) only if it files amended returns:
-(1) For the earliest taxable year ending after December 31, 1986,
in which it had an ownership change, if any, under Sec. 1.1502-92T;
-(2) For all subsequent taxable years for which returns have
already been filed as of the date of the amended return;
-(3) The modification with respect to all members for all taxable
years ending in 1987 and thereafter complies with Secs. 1.1502-91T
through 1.1502-96T and 1.1502-98T; and
(4) The amended return(s) permitted by the applicable statute of
limitations is/are filed before March 26, 1997.
-(e) Section 383. This section also applies for the purposes of
section 383, with appropriate adjustments to reflect that section 383
applies to credits and net capital losses.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
-Par. 3. The authority citation for part 602 continues to read in
part as follows:
-Authority: 26 U.S.C. 7805.
-Par. 4. In Sec. 602.101, paragraph (c) is amended by adding an
entry in numerical order to the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
-(c) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified or described control No.
------------------------------------------------------------------------
* * * * *
1.1502-95T................................................. 1545-1218
* * * * *
------------------------------------------------------------------------
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: May 31, 1996.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 96-15824 Filed 6-26-96; 8:45 am]
BILLING CODE 4830-01-U