- 20 -
arguing that section 469(b) allows those PAL's disallowed under
section 469(a) to be used in subsequent years and that, if
section 1371(b)(1) disallows the PAL's, section 469 does not
apply because there is no other basis for allowing their
subsequent use. Respondent argues that since St. Charles is the
same taxpayer, albeit subject to a different taxing regime,
section 1371(b)(1) merely prevents it from using the PAL's during
the "new regime" but does not preclude their preservation for use
by St. Charles when that "new regime" ends and St. Charles
becomes a taxpayer subject to section 469, as a closely held C
corporation.7
We think petitioner's position as to the dire consequence of
applying section 1371(b) is unfounded in that it ignores the
pattern reflected by section 1371(b) in its entirety, which
provides:
(b) No Carryover Between C Year and S Year.--
(1) From C year to S year.--No carryforward,
and no carryback, arising for a taxable year for
which a corporation is a C corporation may be
carried to a taxable year for which such
corporation is an S corporation.
(2) No carryover from S year.--No
carryforward, and no carryback, shall arise at the
corporate level for a taxable year for which a
corporation is an S corporation.
(3) Treatment of S year as elapsed year.--
Nothing in paragraphs (1) and (2) shall prevent
treating a taxable year for which a corporation is
an S corporation as a taxable year for purposes of
determining the number of taxable years to which
an item may be carried back or carried forward.
7 Although not a fact involved in our analysis, we note
that St. Charles reverted to C corporation status in 1995.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011