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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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