Affiliated group with insolvent members....Sec. 108(a) excludes discharge of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. income from gross income if the taxpayer is in a Title 11 case, or to the extent of the taxpayer's insolvency insolvency Condition in which liabilities exceed assets so that creditors cannot be paid. It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet , when the discharge occurs. Under Sec. 108(b), the taxpayer's attributes, to the extent thereof, are reduced up to the amount of debt discharge that is excluded from income under Sec. 108(a). In the first ruling on this issue (Letter Ruling 9121017), the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. has held that a member of a consolidated group must reduce its own tax attributes (e.g., net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. ) under Sec. 108(b) only to the extent of its excluded discharge of indebtedness income under Sec. 108(a). The tax attributes of other consolidated group members are unaffected by the debt discharge. |
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