NOLCONet Operating Loss Carryover
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1502-96T(a) treats certain group members (or loss subgroups) with NOLCOs (or NUBIGs and NUBILs) as satisfying the definition of a loss group.
Example 6: P and S, calendar-year corporations, became affiliated at the close of 1992, when S had a $300 NOLCO.
1502-21A(A)(2), S cannot use any of its $300 NOLCO in 1993, 1994 or 1995; it will carry forward to 1996.
Planning opportunity: Under the 1996 TRs, S could have used all of its NOLCO for 1994 and 1995, because it had a cumulative positive contribution to taxable income for those years.
P, S and T filed their first consolidated return for 1993; T has a 1992 $100 NOLCO.
1502-21A(d)(2), none of T's NOLCO could be used, because T had a separate loss in each of 1993, 1994 and 1995.
Cumulative 1993 1994 1995 total P-ordinary income $100 $50 $100 $250 P-capital gain (loss) (50) (40) (50) (140) S-ordinary income 20 10 30 60 T-ordinary income 30 10 30 70 T-capital gain (loss) 50 40 40 130 CTI (before NOL) $150 $70 $150 $370 NOLCO used (current regs.
15012-21A(c)(2), the SRLY limit on the use of T's $200 NOLCO is substantially lower than T's contribution to CTI.
Planning opportunity: Because the P group could use all of T's 1992 NOLCO if the 1996 TRs were in effect for that period, consideration should be given to using the Temp.
If the P-S-T group elects to use the 1996 TRs for 1995 and 1996, T's 1997 cumulative contribution to the P-S-T group's CTI is $60; thus, T's entire $30 SRLY NOLCO can be used in 1997.
6) The NOLCO that can be absorbed is limited to CTI before carryovers; see Phinney v.