- 14 -
forward to offset income in other years, sec. 172(a) and (b). No
provision, however, allows the same deduction to be used against
income of both current and noncurrent years. Simply put, once a
deduction is absorbed by income from the current year, it is no
longer available as an NOL to be carried backward or forward.
Under the consolidated return regulations, SLL's are netted, in
the first instance, against the current income of the individual
member and then against the income of the group. Secs. 1.1502-
21A, 1.1502-12, Income Tax Regs. If the SLL's are totally
absorbed by the current income items of the member in the
computation of its separate taxable income under section 1.1502-
12, Income Tax Regs., as in the instant case, those deductions
are exhausted and cannot be used again by the group, as SLL's,
against income in carryback years.10 In effect, a member that
has separate taxable income within the meaning of section 1.1502-
12, Income Tax Regs., has no SLL to be carried back because the
SLL expenses have been used to offset the member's income
currently. Consequently, the SLL expenditures of a member with
10 A consolidated group with a CNOL would, however, be eligible
to carry back the SLL deductions of a member that has separate
loss, within the meaning of sec. 1.1502-12, Income Tax Regs. In
that case, the SLL deductions would be absorbed neither by the
individual member's gross income, in the computation of separate
taxable income (or loss) under sec. 1.1502-12, Income Tax Regs.,
nor by the separate taxable incomes of the other members in the
aggregation of the member's separate taxable incomes and losses
under sec. 1.1502-21A(f)(1), Income Tax Regs.
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