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the bankruptcy estate of a debtor who is an individual succeeds
to his NOL carryforwards and that upon termination of the
bankruptcy estate the individual taxpayer succeeds to any tax
attributes of the bankruptcy estate. Sec. 1398(g)(1), (i)
(1994). Section 1398, however, is not applicable to bankruptcy
proceedings, such as petitioner’s, that were commenced prior to
March 25, 1981. Pub. L. 96-589, sec. 7(b), 94 Stat. 3412.
As alluded to above, however, in 1990, the District Court,
with jurisdiction over petitioner's bankruptcy proceeding, held
specifically that petitioner's 1975-NOL was to be treated as
property of the bankruptcy estate and not of petitioner.
Petitioners argue that under Segal v. Rochelle, 382 U.S. 375
(1966), they, not petitioner's bankruptcy estate, should be
regarded as owners of petitioners' 1975-NOL and that petitioner's
bankruptcy estate was never entitled to claim the 1975-NOL.
Respondent argues that the District Court's holding that the
1975-NOL should be treated as property of the bankruptcy estate,
and not of petitioner, should collaterally estop petitioners on
this issue.
Petitioners’ and respondent's arguments, however, as to
ownership of the 1975-NOL need not be decided. Based on the
analysis set forth below and regardless of any question as to
ownership of the 1975-NOL, petitioners' attempt in this case to
carry forward and apply the 1975-NOL to offset their taxable
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Last modified: May 25, 2011