- 37 -
1398(i). The debtor is then free to use the NOL as a
carryforward, section 1398(i), or carryback, as long as
the NOL arose before the commencement of the bankruptcy
case, section 1398(j)(2)(B). [Kahle v. Commissioner,
T.C. Memo. 1997-91.]
See also McGuirl v. Commissioner, T.C. Memo. 1999-21.
Petitioner argues that he succeeded to NOLs that were
incurred by the operation of the bankruptcy estate and that
section 1398(j)(2)(B) limits only his ability to carry back such
NOLs to his taxable years that preceded the commencement of his
bankruptcy case. Thus, he argues, he may use the NOLs in
postcommencement tax years. We agree with petitioner that the
losses succeeded to from the estate may be used, to the extent
permitted in section 172, in the debtor’s taxable years beginning
with the year in which the bankruptcy commenced.
Some commentators have drawn an analogy between section
1398(g) and (i), and section 642(h), which governs the
availability of a trust’s or estate’s unused loss carryovers to
the beneficiaries. In section 642(h) it is clear that a
beneficiary may only carry forward the trust’s or estate’s unused
loss carryovers beginning with the year the trust or estate
terminates. The analogy was likely drawn because of the
acquisition of a trust’s or estate’s tax losses upon the
termination of the trust or estate. The analogy diminishes in
significance, however, because of an important distinction
between the section 642(h) situation and the section 1398
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011