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The regulations clearly address factual situations such as those
presented in this case that support respondent's position.
Section 1301(c) provides:
SEC. 1301(c). Regulations.–-The Secretary shall
prescribe such regulations as may be appropriate to carry
out the purposes of this section, including regulations
regarding--
(1) the order and manner in which items of income,
gain, deduction, or loss, or limitations on tax, shall
be taken into account in computing the tax imposed by
this chapter on the income of any taxpayer to whom this
section applies for any taxable year * * * [Emphasis
added.]
Section 1.1301-1(d)(2), Income Tax Regs., provides, in
pertinent part:
(2) Computation in base years. * * * For this purpose,
all allowable deductions (including the full amount of any
net operating loss carryover) are taken into account in
determining the taxable income for the base year even if the
deductions exceed gross income and the result is negative.
If the result is negative, however, any amount that may
provide a benefit in another taxable year is added back in
determining base year taxable income. Amounts that may
provide a benefit in another year include--
(A) The net operating loss (as defined in section
172(c)) for the base year;
(B) The net operating loss for any other year to the
extent carried forward from the base year under section
172(b)(2); * * * [Emphasis added.]
The preamble for the final section 1301 regulations stated,
in pertinent part:
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