Subchapter C -- Loss Carryovers Following Reorganizations and Changes in Ownership

Over the last decade, loss carryovers following reorganizations and certain stock purchases have been subject to limitations of uncertain application. New Internal Revenue Code (IRC) Section 382 shifts the method of limitation away from the loss carryover itself to the subsequent earnings of the con...

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Bibliographic Details
Published inThe Tax Adviser Vol. 18; no. 4; p. 226
Main Author Worthy, K Martin
Format Trade Publication Article
LanguageEnglish
Published New York American Institute of Certified Public Accountants 01.04.1987
Subjects
Capital losses
Carryover
Changes
Corporate reorganization
Corporate tax planning
Foreign tax credits
Internal Revenue Code
Limits
Losses
Ownership
Ownership changes
Supreme Court decisions
Tax credits
Tax Reform Act 1986-US
Tests
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Summary:Over the last decade, loss carryovers following reorganizations and certain stock purchases have been subject to limitations of uncertain application. New Internal Revenue Code (IRC) Section 382 shifts the method of limitation away from the loss carryover itself to the subsequent earnings of the continuing corporation. Now, after a change in ownership of more than 50% (by value) of stock among 5% stockholders of a loss corporation over a 3-year period, the taxable income of the loss corporation available for offset by prechange losses will be limited each year. The relevant testing period for determining whether a more-than-50% ownership shift has occurred is usually the 3-year period ending on the day of any owner change involving a 5% stockholder or equity structure shift. The Tax Reform Act of 1986 also amends IRC Section 383, which now applies special limitations on the use of certain excess business and research credits, net capital loss carryforwards, and excess foreign tax credits in the case of a more-than-50% ownership change.
ISSN:0039-9957