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Therefore, they have a class life of 10 years and, by virtue of
section 168(e)(1), are 7-year property, with an applicable recovery
period of 7 years. See sec. 168(c)(1).
V. Net Operating Loss Issue
A. Introduction
Section 172(a) allows a “net operating loss deduction” for the
aggregate of net operating loss carrybacks and carryovers to the
taxable year. The term “net operating loss” (NOL) is defined in
section 172(c). Section 172(b) provides the carryback and carryover
periods for NOLs. Section 172(b)(1)(A) and (B) provides that,
generally, the carryback period for a NOL is 3 years and the
carryover period is 15 years. Section 172(b)(1)(L) provides a
special rule with respect to the bad debt losses of commercial
banks: The portion of the NOL of a commercial bank that is
attributable to bad debt losses is prescribed a carryback period of
10 years and carryover period of 5 years. Section 172(l) provides a
rule for determining the portion of a bank’s NOL attributable bad
debt losses:
The portion of the net operating loss for any taxable year
which is attributable to the deduction allowed under
section 166(a) shall be the excess of --
(i) the net operating loss for such taxable
year, over
(ii) the net operating loss for such taxable
year determined without regard to the amount
allowed as a deduction under section 166(a) for
such taxable year.
Section 166 allows a deduction for bad debts. Section 1.1502-11,
Income Tax Regs., prescribes how consolidated taxable income is to
be determined. Among other things, it prescribes that consolidated
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