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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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