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dispute concerns the determination of the bank bad debt portion of
the consolidated NOL. We agree with respondent’s determination.
B. Facts
All of the facts relevant to this issue have been stipulated.
In abbreviated form, those facts are as follows:
By Form 1139, Corporation Application for Tentative Refund (the
Form 1139), dated November 18, 1988, UBC claimed tentative refunds
for the taxable years 1977, 1978, 1979, 1981, 1984, and 1985 based
on the carryback of a NOL from the UBC affiliated group's 1987
taxable year (the 1987 consolidated NOL).
UBC carried a portion of the consolidated 1987 NOL back to the
UBC affiliated group's taxable years 1977, 1978, and 1981.
On the Form 1139, UBC calculated the portion of the
consolidated 1987 NOL subject to the 10-year carryback provided for
by section 172(b)(1)(L) (the bad debt portion) by (1) determining
the bad debt and nonbad debt portions of each loss bank member's
NOL, (2) allocating the consolidated 1987 NOL among the loss
members and, in the case of loss bank members, between the bad debt
and nonbad debt portions of their NOLs, and (3) aggregating the
portions of the consolidated 1987 NOL allocated to the bad debt
portions of the loss bank members' NOLs.
On the Form 1139, UBC determined the bad debt portion of each
loss bank member's NOL by taking the excess of its NOL over its NOL
less its bad debt deduction (i.e., an amount equal to the lesser of
the bank's NOL or bad debt deduction). Thus, for example, in the
case of United Bank of Aurora-South (Aurora-South), a bank member
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