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The IRS National Office has advised, in TAM 200044003, that the limitation on the utilization of net operating loss carryovers in 381(c)(1)(B) applies to the computation of an alternative tax net operating loss carryover deduction. Section 381 provides that, in certain corporate acquisitions, the acquiring corporation succeeds to and takes into account, among other things, the NOL carryovers of the distributor or transferor corporation.
In TAM 200044003, the Taxpayer acquired Target in a transaction intended to qualify as a tax-free reorganization under 368(a)(1)(D), 354, and 356, and filed a consolidated tax return utilizing Target's net operating loss (NOL) carryovers and alternative tax NOL carryovers. Taxpayer applied 381(c)(1)(B) to the net operating loss deduction, as provided in 381(a)(2), but did not apply it to the alternative tax NOL deduction.
Under 381(c)(1), the NOL deduction allowed for the year includes the NOL carryovers as determined under 172, but as limited by the formula in 381(c)(1)(B) (as well as certain other limitations). Section 381(c)(1)(B) provides that the portion of the deduction attributable to the NOL carryovers of the distributor or transferor corporation to the first taxable year of the acquiring corporation ending after the date of distribution or transfer is limited to an amount which bears the same ratio to the taxable income (determined without regard to an NOL deduction) of the acquiring corporation in such taxable year as the number of days in the taxable year after the date of distribution or transfer bears to the total number of days in the taxable year. Section 381(c)(1)(B), however, does not explicitly...