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return regulations speak in terms of a CNOL, see sec. 1.1502-21A,
Income Tax Regs., it is quite clear that the CNOL is to be
determined by taking into account the separate taxable income (or
loss) of each member of the group. See Norwest Corp. and Subs.
v. Commissioner, 111 T.C. 105, 170 (1998); secs. 1.1502-21A(f),
1.1502-12, Income Tax Regs. Under section 1.1502-21A(f), Income
Tax Regs., the CNOL is computed by combining the separate taxable
income or losses of the members and then adjusting for certain
items that are taken into account on a consolidated basis.
Accordingly, under the regulations, the first step in
determining the CNOL is to compute the separate taxable income
(or loss) of each member. Pursuant to section 1.1502-12, Income
Tax Regs., the separate taxable income (or loss) of a member is
computed, with certain modifications, as if the member were a
separate corporation. The computation of separate taxable income
(or loss) under section 1.1502-12, Income Tax Regs., excludes
certain items that are taken into account on a consolidated basis
including: NOL's, capital gains and losses, section 1231 gains
and losses, charitable contributions, and the dividends received
deduction. See sec. 1.1502-12(h) through (l), (n), Income Tax
Regs. SLL's are not included among the modifications to the
computation of separate taxable income under section 1.1502-12,
Income Tax Regs.
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