Temp. regs. on attribute reduction when a consolidated group member realizes DOI income.

• Author: Yecies, Mark

Temporary regulations (TD 9089) address reducing tax attributes when a consolidated group member realizes discharge of indebtedness (DOI) income on debt that is not an inter-company obligation under Regs. Sec. 1.1502-13(g). Essentially, Temp. Regs. Sec. 1.1502-28T adopts a consolidated approach to attribute reduction and applies to DOI occurring after Aug. 29, 2003.

Background

When a debtor corporation is in bankruptcy or insolvent (to the extent of the debtor's insolvency) or has qualified farm debt, and such debt is discharged, instead of including the discharged debt in income, it must reduce its tax attributes by the debt discharged, under Sec. 108(b)(1). Unless the corporation makes an election under Sec. 108(b)(5), tax attributes are reduced in the following order, under Sec. 108(b)(2): (1) net operating losses and net operating loss carryovers; (2) general business credits under Sec. 38; (3) minimum tax credits under Sec. 53(b); (4) net capital losses and capital loss carryovers; (5) asset basis; (6) passive activity loss and credit carryovers under Sec...