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reduce the debtor’s nonbankruptcy income realized during the
bankruptcy, those losses might never be used.16 It is unlikely
that such a result was intended.
We must, however, also consider section 172, which defines
the key terms and provides for the computations of net operating
losses, carrybacks, and carryforwards. Subsections (g)(1) and
(i) of section 1398 each provide that a debtor succeeds to loss
carryovers under section 172. Section 172(a) allows a deduction
for the taxable year of “an amount equal to the aggregate of (1)
the net operating loss carryovers to such year, plus (2) the net
operating loss carrybacks to such year.” The allowable carryback
and carryforward periods for the taxable years at issue are 3
years and 15 years, respectively. See sec. 172(b).17
Section 172(b)(2), in pertinent part, provides:
Amount of carrybacks and carryovers.--The entire amount
of the net operating loss for any taxable year * * *
shall be carried to the earliest of the taxable years
to which * * * such loss may be carried. The portion
of such loss which shall be carried to each of the
other taxable years shall be the excess, if any, of the
amount of such loss over the sum of the taxable income
for each of the prior taxable years to which such loss
may be carried.
16 The losses could be carried forward, but may be lost if
subsequent years’ gains are insufficient to absorb the losses.
17 The amendments to sec. 172 by the Taxpayer Relief Act of
1997, Pub. L. 105-34, sec. 1082(a)(1) and (2), 111 Stat. 950,
revised the allowable carryback and carryforward periods to 2 and
20 years, respectively. These amendments do not apply to
petitioner’s 1995 and 1996 tax years because the amendment is
effective for years after Aug. 5, 1997.
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