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The next step in the determination of the CNOL is to combine
the separate taxable incomes and losses of the members. In the
aggregation of the separate taxable income and losses, current
losses of members offset current income of other members.
Certain specified consolidated items are then taken into account.
See sec. 1.1502-21A(f), Income Tax Regs. SLL's are not listed
among the items which are to be taken into account on a
consolidated basis under section 1.1502-21A(f), Income Tax Regs.
The consolidated return regulations specifically identify
several items that are to be treated on a consolidated basis.
Those regulations, however, do not use the term "consolidated
specified liability loss" or incorporate such a concept by
directing that SLL's be treated on a consolidated basis.
Consequently, we conclude that SLL's are not to be taken into
account separately as consolidated items for purposes of
computing the group's CNOL. See, e.g., Amtel Inc. v. United
States, 31 Fed. Cl. 598, 602 (1994), affd. without published
opinion 59 F.3d 181 (Fed. Cir. 1995) (court rejected the concept
of a "consolidated product liability loss" under the consolidated
return regulations). Instead, SLL's are to be netted against the
member's items of income in the computation of separate taxable
income (or loss) under section 1.1502-12, Income Tax Regs.
When allowable deductions exceed gross income, the result is
an NOL, sec. 172(c), and the excess may be carried backward or
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