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consolidated net operating loss for such taxable
year, then under regulations prescribed by the
Secretary, the amount of such loss which cannot be
absorbed in the applicable carryback periods
against the taxable income of such members not
taxed under section 801 shall be taken into
account in determining the consolidated taxable
income of the affiliated group for such taxable
year to the extent of 35 percent of such loss or
35 percent of the taxable income of the members
taxed under section 801, whichever is less. The
unused portion of such loss shall be available as
a carryover, subject to the same limitations
(applicable to the sum of the loss for the
carryover year and the loss (or losses) carried
over to such year), in applicable carryover years.
Section 1.1502-47, Income Tax Regs., was promulgated to
govern consolidated returns by life-nonlife groups. The
regulations generally adopt a “subgroup method” for determining
consolidated taxable income. Sec. 1.1502-47(a)(2)(i), Income Tax
Regs. This method divides the affiliated group into a life
subgroup and a nonlife subgroup. Id.; sec. 1.1502-47(d)(8) and
(9), Income Tax Regs. Consolidated taxable income for the group
is then defined as the sum of: (1) Nonlife consolidated taxable
income, as set off by allowable life losses; (2) consolidated
partial life insurance company taxable income (consolidated
partial LICTI), as set off by allowable nonlife losses; and
(3) amounts subtracted under section 815 from life policyholders’
surplus accounts. Sec. 1.1502-47(g), Income Tax Regs.
Nonlife consolidated taxable income, in turn, aggregates the
separate taxable incomes of the nonlife members, with specified
consolidated adjustments, and incorporates reductions for current
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