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Section 1.172-1(b), Income Tax Regs., also describes the
steps to be taken to ascertain an NOL deduction for a given
taxable year. It describes NOL carryovers from “preceding
taxable years” and NOL carrybacks from such “succeeding taxable
years”. An NOL deduction from any given year maintains its
character of arising in that year when carried back or carried
forward. See sec. 1.172-6, Income Tax Regs. In addition,
section 1.172-4(a)(3), Income Tax Regs., provides:
The amount which is carried back or carried over to any
taxable year is the net operating loss to the extent it
was not absorbed in the computation of the taxable (or
net) income for other taxable years, preceding such
taxable year, to which it may be carried back or
carried over.
Section 172, therefore, requires that the losses be carried
back and forward in a certain order and places outer limits on
the years to which the losses may be applied. The regimen of
section 172 also provides that the year from which the loss
emanates does not change. Therefore, losses acquired by the
estate or acquired or reacquired by the debtor would be time
limited according to the source year of the loss.
Accordingly, sections 1398 and 172 do not circumscribe
petitioner’s ability to carry forward prepetition NOLs that he
succeeded to from the bankruptcy estate. This view is supported
in the following dicta:
Any remaining NOL belonging to the estate will be
returned to the debtor-taxpayer after the discharge in
bankruptcy and termination of the estate. Sec.
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