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2. Specified Liability Losses
Section 172(f) defines a specified liability loss in
pertinent part as follows:
(1) In general.--The term “specified liability
loss” means the sum of the following amounts to the
extent taken into account in computing the net
operating loss for the taxable year:
* * * * * * *
(B) Any amount (not described in subparagraph
(A)) allowable as a deduction under this chapter
with respect to a liability which arises under a
Federal or State law * * * if--
(i) * * * the act (or failure to act)
giving rise to such liability occurs at least
3 years before the beginning of the taxable
year,
* * * * * * *
A liability shall not be taken into account under
subparagraph (B) unless the taxpayer used an
accrual method of accounting throughout the period
or periods during which the acts or failures to
act giving rise to such liability occurred.
(2) Limitation.--The amount of the specified
liability loss for any taxable year shall not exceed
the amount of the net operating loss for such taxable
year.
The 10-year carryback for specified liability losses
described in section 172(f)(1)(B) applies if:
(1) The taxpayer took the specified liability loss into
account in computing its net operating loss for the taxable year;
(2) the expense resulting in the specified liability loss is
deductible under chapter 1 of the Internal Revenue Code;
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Last modified: May 25, 2011