St. Charles Investment Co., Burton C. Boothby, Tax Matters Person - Page 22

                                       - 22 -                                         
          supra, 1986-3 C.B. (Vol. 3) at 722.  Under section 469(b),                  
          contrary to petitioner's contention of permanent loss, they                 
          remain available for potential use in subsequent years if and               
          when St. Charles relinquishes its S status.                                 
               In sum, we are satisfied that PAL's are losses within the              
          meaning of section 1371.  Not only is the word "carryforward" in            
          that section unqualified, but PAL's are in effect NOL's albeit              
          computed separately for a particular activity and thus should not           
          be treated any differently than NOL's to which section 1371                 
          unquestionably applies.                                                     
               Taking into account the language of the statute and the                
          legislative history, including the objective of Congress in                 
          enacting sections 469(b) and 1371(b)(1), we conclude that St.               
          Charles is precluded from carrying forward its suspended PAL's to           
          the taxable year before us.9  We emphasize that, as our analysis            
          has revealed, there is no conflict between sections 469(b) and              
          1371(b)(1) with the result that our preclusion of use in 1991 is            
          grounded on the unavailability of the PAL's during that year and            
          their continued availability for future use.                                
          Adjustment of Basis for Suspended PAL's                                     
               Petitioner argues in the alternative that, if respondent is            
          sustained on the suspended PAL's issue, St. Charles should be               

               9  We reiterate that this case does not involve the tax on             
          built-in gain pursuant to sec. 1374, and thus our holding does              
          not extend to the use of suspended PAL's in calculating such                

Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011