Oren L. Benton - Page 35

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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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