1.1502-94—Coordination with section 382 and the regulations thereunder when a corporation becomes a member of a consolidated group.
(a) Scope—
(1) In general.
This section applies section 382 and the regulations thereunder to a corporation that is a new loss member of a consolidated group. A corporation is a new loss member if it—
(i)
Carries over a net operating loss that arose (or is treated under § 1.1502-21(c) as arising) in a SRLY with respect to the current group, and that is not described in § 1.1502-91(d)(1); or
(ii)
Has a net unrealized built-in loss (determined under paragraph (c) of this section immediately before it becomes a member of the current group by treating that day as a change date) that is not taken into account under § 1.1502-91(d)(2) in determining whether two or more corporations compose a loss subgroup.
(2) Successor corporation as new loss member.
A new loss member also includes any successor to a corporation that has a net operating loss carryover arising in a SRLY and that is treated as remaining in existence under § 1.382-2(a)(1)(ii) following a transaction described in section 381(a).
(3) Coordination in the case of a loss subgroup.
For rules regarding the determination of whether there is an ownership change of a loss subgroup with respect to a net operating loss or a net unrealized built-in loss described in § 1.1502-91(d) (relating to the definition of loss subgroup) and the computation of a subgroup section 382 limitation following such an ownership change, see §§ 1.1502-92 and 1.1502-93.
(4) End of separate tracking of certain losses.
If § 1.1502-96(a) (relating to the end of separate tracking of attributes) applies to a new loss member, then, while that member remains a member of the consolidated group, there is an ownership change with respect to its attributes described in § 1.1502-96(a)(2) only if the consolidated group is a loss group and has an ownership change under § 1.1502-92(b)(1)(i) (or that member has an ownership change under § 1.1502-96(b) (relating to ownership changes of subsidiaries)). If, however, the new loss member has had an ownership change before § 1.1502-96(a) applies, see § 1.1502-96(c) for the continuing application of the section 382 limitation with respect to the member's pre-change losses.
(5) Cross-reference.
See section 382(a) and § 1.1502-96(c) for the continuing effect of an ownership change after a corporation becomes or ceases to be a member.
(b) Application of
(1) In general.
Section 382 and the regulations thereunder apply to a new loss member to determine, on a separate entity basis, whether and to what extent a section 382 limitation applies to limit the amount of consolidated taxable income that may be offset by the new loss member's pre-change separate attributes. For example, if an ownership change with respect to the new loss member occurs under section 382 and the regulations thereunder, the amount of consolidated taxable income for any post-change year that may be offset by the new loss member's pre-change separate attributes shall not exceed the section 382 limitation as determined separately under section 382(b) with respect to that member for such year. If the post-change year includes the change date, section 382(b)(3)(A) is applied so that the section 382 limitation of the new loss member does not apply to the portion of the taxable income for such year that is allocable to the period in such year on or before the change date. See generally § 1.382-6 (relating to the allocation of income and loss).
(2) Adjustment to value.
Appropriate adjustments must be made to the extent necessary to prevent any duplication of the value of the stock of a member, even though corporations that do not file consolidated returns may not be required to make such an adjustment. For example, the principles of § 1.1502-93(b)(2)(ii) (relating to adjustments to value) apply in determining the value of a new loss member.
(i)
Any net operating loss carryover of the new loss member described in paragraph (a)(1) of this section; and
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(c) Built-in gains and losses.
As the context may require, the principles of §§ 1.1502-91(g) and (h) and 1.1502-93(c) (relating to built-in gains and losses) apply to a new loss member on a separate entity basis. See § 1.1502-91(g)(4). See § 1.1502-13 (including Example 10 of § 1.1502-13(c)(7)) for rules relating to the treatment of intercompany transactions.
(d) Information statements.
The common parent of a consolidated group that has a new loss member subject to paragraph (b)(1) of this section during a consolidated return year must file the information statement required by § 1.382-11(a) because of any owner shift, equity structure shift, or other transaction described in § 1.382-2T(a)(2)(i). Instead of filing a separate statement for each new loss member, the common parent may file a single statement described in § 1.382-11(a) with respect to the stock ownership of the common parent (which is treated as a loss corporation). In addition to the information concerning stock ownership of the common parent, the single statement must identify each new loss member and state which new loss members, if any, have had ownership changes during the consolidated return year. The new loss member is, however, required to maintain the records necessary to determine if it has an ownership change. This paragraph (d) applies with respect to the attributes of a new loss member until an event occurs which ends separate tracking under § 1.1502-96(a). After that time, the information statement described in § 1.1502-92(e)(1) must be filed with respect to these attributes.