Oren L. Benton - Page 27

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               The design of the statute is clear.  The party holding                 
               the property, whether the debtor or the estate, is also                
               entitled to any available net operating loss carryover,                
               so that if that party incurs a taxable gain in the                     
               disposition of the property he can use the net                         
               operating loss carryover to offset the gain.  * * *                    
               [Id. at 272.]                                                          
          The court further reasoned that the intended symmetry of the two            
          subsections warranted that the phrase “termination of the estate”           
          should have the same meaning in the context of subsections (f)              
          and (i) of section 1398.  This would satisfy the congressional              
          intent to place net operating loss deductions with the party that           
          recognizes the gain upon the disposition of the property.9                  
               The interpretation that subsections (f) and (i) of section             
          1398 were intended to cause tax losses to vest with the party               
          recognizing gain on the disposition of property is a reasonable             
          one.  As previously explained, in the context of section 1398,              

               9 Under sec. 1398, the tax attributes (net operating losses)           
          follow the assets of the debtor and the debtor’s bankruptcy                 
          estate.  Those parties are expressly contemplated within the                
          context of sec. 1398 and, in particular, subsecs. (f), (g), and             
          (i).  The use of the debtor’s or the estate’s tax attributes is a           
          limited one and does not extend to unrelated third parties.                 
          Congress specifically provided that the bankruptcy estate                   
          succeeds to the debtor’s tax attributes and that those attributes           
          return to the debtor upon the termination of the estate.  Other             
          entities that may be connected with the bankruptcy estate, such             
          as a liquidating trust for the benefit of creditors, have been              
          found to be separate or unrelated entities for purpose of                   
          taxation.  See Holywell Corp. v. Smith, 503 U.S. 47 (1992).                 
          Accordingly, when petitioner’s bankruptcy estate assets were                
          transferred to the liquidating trust for the benefit of                     
          creditors, it was not contemplated that the creditors or the                
          trust for their benefit would succeed to the tax attributes of              
          petitioner/debtor or his estate.                                            

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