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Affiliated group with insolvent members....

Sec. 108(a) excludes discharge of indebtedness income from gross income if the taxpayer is in a Title 11 case, or to the extent of the taxpayer's insolvency, 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 has held that a member of a consolidated group must reduce its own tax attributes (e.g., net operating losses) 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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Author:Duvall, Kevin A.
Publication:The Tax Adviser
Date:Jan 1, 1992
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