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OPINION
1. Sections 382 and 3834
Section 382 provides for the elimination of NOL carryovers
of a corporation if a qualifying change in the ownership of the
stock of the corporation is accompanied by the failure of that
corporation to continue carrying on substantially the same trade
or business as it conducted before the change of ownership.
Neither party contests that there was the required change of
ownership. The only question to be resolved, therefore, is
whether CDC carried on substantially the same trade or business
under section 382(a)(1)(C).
Respondent claims that section 382 applies because
petitioner's drilling business was dormant for 2 years before the
acquisition.5 Alternatively, if CDC was in an active business
4 The parties agree that our resolution of the sec. 382
issue will also resolve the sec. 383 issue.
5 Sec. 1.382(a)-1(h)(6), Income Tax Regs., provides in
part:
(6) A corporation has not continued to carry on a
trade or business substantially the same as that
conducted before any increase in the ownership of its
stock if the corporation is not carrying on an active
trade or business at the time of such increase in
ownership. Thus, if the corporation is inactive at the
time of such an increase and subsequently is
reactivated in the same line of business as that
(continued...)
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