James F. McGuirl - Page 9




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               Section 1398 provides that the bankruptcy estate of the                
          debtor succeeds to, inter alia, any net operating loss carryovers           
          of the debtor.  Sec. 1398(g).  In addition, section 1398 provides           
          that the debtor shall succeed to, inter alia, any remaining net             
          operating loss carryovers of the bankruptcy estate upon the                 
          termination of the estate.  Sec. 1398(i).                                   
               A bankruptcy estate is created in an involuntary case upon             
          the filing of the petition with the bankruptcy court.  Bankruptcy           
          Code, 11 U.S.C. sec. 303 (1978).  At that time, certain tax                 
          attributes, including any net operating losses, determined as of            
          the first day of the debtor-taxpayer's taxable year in which the            
          bankruptcy case commences, become part of the estate, and no                
          longer belong to the debtor-taxpayer.  Sec. 1398(g); Kahle v.               
          Commissioner, T.C. Memo. 1997-91.                                           
               Any remaining net operating loss belonging to the estate               
          will be returned to the debtor-taxpayer after the termination of            
          the estate.  Sec. 1398(i).  "Termination of the estate" refers to           
          the closing of the estate.  Bankruptcy Code, 11 U.S.C. sec.                 
          346(i)(2) (1978); see also Firsdon v. United States, 95 F.3d 444,           
          446 (6th Cir. 1996), affg. 75 AFTR 2d 95-528, 95-1 USTC par.                
          50,040 (N.D. Ohio 1994); Beery v. Commissioner, T.C. Memo. 1996-            
          464.  The debtor is then free to use the net operating loss as a            
          carryover, sec. 1398(i), or carryback, as long as the net                   
          operating loss arose before the commencement of the bankruptcy              
          case.  Sec. 1398(j)(2)(B).                                                  




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