The Sixth Circuit held that a CNOL may be carried back ten years and may offset the group's consolidated taxable income if, in the loss year, any member of the group incurs the requisite types of expenses, regardless whether that member generates a loss on a separate company basis.
For the 1989 tax year, the P group had a CNOL of $800 and $600 of PLEs, as follows: Separate [sections] Member PLE Share of CNOL 172(f) Loss X $ 100 $ 700 $ 100 Y $ 200 $ 100 $ 100 Z $ 300 $ 0 $ 0 Totals $ 600 $ 800 $ 200 Using a single-entity approach, the P group would have incurred a PLL of $600, the lesser of the P group's CNOL ($800) and product liability expenses ($600).
Thus, in Example 8 above, P will no longer have to reduce its basis in S as if the $20 CNOL
had been absorbed--the $20 worthless stock deduction would be allowed.
Accordingly, the CNOL
for year 3 is reduced by S's $10 share to $40.
Although the amount of a group's CNOL attributable to a member may be easily determined under Regs.
It is significant in determining whether a consolidated group must reduce its CNOL as the debtor member's tax attribute, even if no portion (or only a small portion) of the CNOL is attributable to the debtor member who realized the excluded COD income.
In general, the Court rejected the concept of a "separate" NOL, as PLEs cannot be compared with any NOL to produce a PLL until a CNOL has been calculated.
108(b) could operate to eliminate permanently $700 of the year 2 CNOL attributable to X.
381 is not applicable and the CNOL attributable to T is carried back to T's two preceding tax years (Regs.
381 applies and the CNOL attributable to the new subsidiary cannot be carried back to T (Sec.
the creditor members) claimed bad debt deductions for approximately the amount of discharge, which ultimately increased the group's CNOL
carryforward by a like amount.
1502-91T(c)(1) defines a loss group as any consolidated group that (1) is entitled to use a NOL that did not arise (and is not treated as arising) in a SRLY; (2) has a CNOL
for a tax year in which a testing date of the common parent occurs (determined by treating the common parent as a loss corporation); or (3) has a NUBIL on the testing date.