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responsible for the income tax attributes for any assets that the
debtor retains outside of the bankruptcy proceeding. In effect,
the statute creates two separate, but parallel, taxpayers during
the bankruptcy estate, followed by the recombination of both
their attributes into one upon the estate’s termination.14
Significantly, with respect to the tax attributes, the
debtor/taxpayer is the predecessor to and successor of the
bankruptcy estate.
The parties agree that section 1398 permits a debtor to
carry forward either losses sourced in tax years prior to the
bankruptcy commencement or losses which the debtor acquired from
the estate. The dispute concerns whether the losses may be
carried forward from the commencement of the bankruptcy
proceeding or are limited to the period beginning with the
termination of the estate. So, for example, we consider whether
petitioner may carry forward his own prebankruptcy NOL, to the
extent not used or absorbed by the estate, to his 1995, 1996,
and/or 1997 tax years. This matter is further complicated by the
two parallel but separate taxpayers (estate and debtor) for the
1995, 1996, and 1997 tax years. Ultimately, the question is
whether the bankruptcy estate becomes the preeminent or sole
taxpayer (to petitioner’s exclusion) for purposes of carryforward
14 We note that only the estate is expressly permitted to
carry back losses to precommencement years during the bankruptcy.
Sec. 1398(j)(2)(A).
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