-8-
the deductions allowed by this chapter over the gross income”, as
modified by section 172(d).7 Sec. 172(c).
The ATNOL is then calculated by taking into account
adjustments to taxable income under sections 56 and 58, and
preference items under section 57.8 Sec. 56(d)(1)(B)(i), (2)(A);
Montgomery v. Commissioner, 127 T.C. 43, 65-66 (2006); Merlo v.
Commissioner, supra at 213. Petitioners argue that the
difference between the adjusted AMT basis and the regular tax
basis of the Veritas shares sold in 2001, $4,344,368, is an
adjustment to their ATNOL under section 56(b)(3).9
The applicable statutes do not provide for such an
adjustment. Section 56(b)(3) provides in part:
7Sec. 172(d) provides that in the case of a noncorporate
taxpayer, the amount deductible on account of capital losses
cannot exceed the amount includable on account of capital gains.
Sec. 172(d)(2)(A); Erfurth v. Commissioner, 77 T.C. 570, 576
(1981); sec. 1.172-3(a)(2), Income Tax Regs. As a result, excess
capital losses are excluded when computing an NOL under sec.
172(c). Montgomery v. Commissioner, 127 T.C. 43, 65-66 (2006);
Merlo v. Commissioner, 126 T.C. 205, 209 (2006), affd. F.3d
(5th Cir., July 17, 2007); Spitz v. Commissioner, T.C. Memo.
2006-168. Petitioners concede that their AMT capital loss
resulting from the sale of their Veritas shares is not included
in the calculation of an ATNOL.
8Sec. 57 preference items are considered only to the extent
they increase the NOL for the year for regular tax purposes.
Sec. 56(d)(2)(A).
9Absent an event causing an adjustment to the bases, such as
the death of the stockholder, see sec. 1014, the difference
between the bases will be the same as the amount of income
included in AMTI on account of the exercise of the ISO.
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