8) See Government Officials Ponder: To SRLY
or Not to SRLY
, TAX NOTES 954 (Feb.
Consequently, there exists an opportunity for profitable taxpayers that have erroneously applied the SRLY
The decision to forgo a SRLY
NOL or capital loss carryover will obviously depend on whether it is likely to be utilized.
rules generally apply when a consolidated group acquires a new subsidiary with loss or credit carry-forwards or a net unrealized built-in loss.
Pursuant to a plan to absorb the losses without limitation by the SRLY
rules, S transfers the land to an unrelated, calendar-year partnership in exchange for a 10% interest in the capital and profits of the partnership in a transaction to which section 721 applies.
In this situation, the new member is subject to both SRLY
Some rules--for example, those relating to deferred intercompany transaction--epitomize the separate-entity concept, whereas others--such as the SRLY
subgroup and section 382 regulations--embody the single-entity concept.
BIG = built-in gain BIL = built-in loss CNOL = consolidated net operating loss CNOLCO = consolidated net operating loss carryover CRY = consolidated return year CTI = consolidated taxable income FMV = fair market value NOL = net operating loss NOLCO = net operating loss carryover NUBIG = net unrealized built-in gain NUBIL = net unrealized built-in loss PCM = parent change method SM = supplemental method SNOL = separate net operating loss SRLY
= separate return limitation year SRY = separate return year
Of course, other rules may limit the allowable loss, such as SRLY
One such transition rule offers consolidated groups an opportunity for significant tax planning for SRLY
Additionally, the actual use in a consolidated return year of any preaffiliation S SRLY
NOLs does not give rise to any negative adjustment in S for E&P purposes at the P level (i.
382 or the SRLY
rules within the P group, P might prefer the capital loss alternative.