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of pretermination NOLs to the bankruptcy years; in other words,
whether petitioner is limited to posttermination (1997 and later)
year carryforwards because of the estate’s application of the
debtor’s precommencement losses and the estate’s losses to any of
the debtor’s precommencement and the estate’s postcommencement
income. Although the statute expressly prohibits carrybacks by
the debtor with respect to years before the commencement of the
bankruptcy, there is no such limitation with respect to
carryforwards to postcommencement years.
Because of the parallel treatment on the income side of the
equation (requiring the debtor and the estate to report only the
income to which each is entitled), it follows that the debtor’s
precommencement and the estate’s losses, to the extent not fully
absorbed during the bankruptcy years, should be applied to any
parallel income of the debtor during those same years. Although
the ordering of such losses (computation and application) could
become complex, it is, nevertheless, appropriate. There is
nothing in section 1398 which would prohibit such treatment.15
Indeed, the approach of section 1398 regarding the income side
would seem to promote this result with respect to the losses. If
a debtor were unable to apply post- or pre-bankruptcy losses to
15 Other than the limitation on the debtor’s ability to
apply carrybacks to prebankruptcy years, sec. 1398 does not
provide any rules or limitations as to the calculation or use of
carrybacks or carryovers of NOLs. Sec. 1398 references sec. 172
for such matters.
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