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(2) Under the SRLY rules, a dual resident corporation=s loss is retained in the entity and can be used only to offset the future income of such entity.
1.1502-28T(a)(2), the DM'S attributes are reduced first, including (1) consolidated attributes attributable to the DM; (2) attributes arising in the DM'S separate return limitation years (SRLYs); and (3) basis of the DM'S property.
Then, the CNOL for year 2 is reduced by S2's $40 share to $160, and S2's $50 SRLY NOL is reduced to zero.
For a detailed discussion of the SRLY overlap rules, see "Acquisition of Loss Companies by Consolidated Groups," by Randy A.
6411 (a), the SRLY of a new qualified member shall be treated as ending on the same date as the end of the current tax year of the consolidated group that the qualified new member joins.
A SRLY loss is a loss incurred by a member of a consolidated group in a year in which the corporation filed a separate tax return or was included in a consolidated return with another affiliated group.
382 will apply to P's acquisition of T, T's pre-acquisition NOLs will not be subject to the SRLY rules, regardless of whether T's stock or assets are acquired.
A SRLY is generally defined as a tax year of a subsidiary in which the subsidiary was not a member of the consolidated group.
Prior to the recent promulgation of the overlap rule, when Acquiring was a member of a consolidated group that acquired the assets of a nonmember Target in a tax-free asset acquisition, the absorption of the Target losses was subject to a SRLY limit, computed with reference to Acquiring's contribution to consolidated taxable income.
Although the government should be commended for reviewing the efficacy of the SRLY rules, the Institute stated, the suggested section 382-approach is misdirected.
382 limit for each of 1996, 1997 and 1998 (unused because the SRLY limitation was lower).
On April 15, 1999, Tax Executives Institute filed the following comments with the Internal Revenue Service, regarding IRS Notice 98-38, a proposal to replace the current separate return limitation year (SRLY) rules of the consolidated return regulations with an approach modeled after section 382 of the Internal Revenue Code.
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