Oren L. Benton - Page 15

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         Temporary Income Tax Regs., 53 Fed. Reg. 5716 (Feb. 25, 1988).               
         Therefore, any NOLs generated by the Benton estate’s suspended               
         passive activity losses arose during the administration of the               
         estate in bankruptcy, when the passive activity assets were                  
         transferred into the liquidation trust, and would not have been              
         prebankruptcy NOLs of petitioner.                                            
              Respondent contends that paragraph 8 of the settlement                  
         agreement prohibits petitioner from using NOLs attributable to               
         the $84 million in suspended passive losses.5  The prohibition of            
         that section concerns section 172 NOLs arising in any taxable                
         period on or before the bankruptcy petition date.  As explained              
         above, the section 172 NOLs attributable to the $84 million in               
         suspended passive losses did not arise before the bankruptcy                 
         petition.  Therefore, any such NOLs, to the extent not used by               
         the Benton estate, became available to petitioner upon the                   
         estate’s termination and may be used in petitioner’s 1995, 1996              
         and 1997 tax years.  We hold that petitioner may apply those                 
         NOLs, to which he succeeded under section 1398(I), to his 1995,              




               5 The first sentence of par. 8 provided:                               
               Oren Benton shall not be allowed any net operating                     
               losses under section 172 arising in any taxable period                 
               on or before the [February 23, 1995, bankruptcy]                       
               Petition date which may be carried forward to any tax                  
               period of the Benton Estate.                                           





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