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OPINION
I. Substantive Law
A. Overview of Section 382
Section 382(a) limits the amount of “pre-change losses” that
a corporation (referred to as a loss corporation) may use to
offset taxable income in the taxable years or periods following
an ownership change.3 “Pre-change losses” include NOL carryovers
to the taxable year in which the ownership change occurs and any
NOL incurred during that taxable year to the extent such NOL is
allocable to the portion of the year ending on the date of the
ownership change.4 Sec. 382(d)(1). An ownership change is
deemed to have occurred if, on a required measurement date (a
testing date), the aggregate percentage ownership interest of one
or more 5-percent shareholders of the loss corporation is more
than 50 percentage points greater than the lowest percentage
ownership interest of such shareholder(s) during the (generally)
3-year period immediately preceding such testing date (the
testing period). Sec. 382(g)(1) and (2), (i); sec. 1.382-
2(a)(4), Income Tax Regs.
3 Sec. 382(b) prescribes a formula for calculating the
amount of the sec. 382 limitation. See also sec. 382(e) and (f).
4 A net operating loss, as defined in sec. 172(c), is an
NOL carryover to the extent it is carried forward to years
following the year of the loss under rules set forth in sec.
172(b).
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Last modified: May 25, 2011