Net operating losses.

(1) Net operating loss reduction. The amount of net operating loss for the taxable year of a nonresident individual, estate or trust is determined in accordance with the provisions of section 132.7 of this Article. The amount of such net operating loss which is available as a carryover to a succeeding taxable year is to be subtracted from the amount by which the sum of the New York items of tax preference, derived from or connected with New York State sources, exceed the total of the applicable specific deduction and the New York State personal income tax for the year.

(2) Net operating loss restoration. The amount of the net operating loss, used in a prior year to reduce the sum of the New York items of tax preference of a nonresident taxpayer, must be treated as a New York item of tax preference derived from or connected with New York State sources, and added to the total Federal items of tax preference derived from or connected with New York State sources in the next succeeding taxable year or years, in order of time, in which such net operating loss carryover reduces Federal taxable income. For purposes of this paragraph, Federal taxable income must be computed using only those items of income, gain, loss or deduction which are derived from or connected with New York State sources. For priority of reduction, see section 122.1(c)(2)(ii) of this Title.