Reduction of tax attributes
(1) In general
(1)In general#
The amount excluded from gross income under subparagraph (A), (B), or (C) of subsection (a)(1) shall be applied to reduce the tax attributes of the taxpayer as provided in paragraph (2).
(2)Tax attributes affected; order of reduction#
Except as provided in paragraph (5), the reduction referred to in paragraph (1) shall be made in the following tax attributes in the following order:
(A) NOL Any net operating loss for the taxable year of the discharge, and any net operating loss carryover to such taxable year.
(B) General business credit Any carryover to or from the taxable year of a discharge of an amount for purposes for determining the amount allowable as a credit under section 38 (relating to general business credit).
(C) Minimum tax credit The amount of the minimum tax credit available under section 53(b) as of the beginning of the taxable year immediately following the taxable year of the discharge.
(D) Capital loss carryovers Any net capital loss for the taxable year of the discharge, and any capital loss carryover to such taxable year under section 1212.
(E) Basis reduction (i) In general The basis of the property of the taxpayer. (ii) Cross reference For provisions for making the reduction described in clause (i), see section 1017.
(F) Passive activity loss and credit carryovers Any passive activity loss or credit carryover of the taxpayer under section 469(b) from the taxable year of the discharge.
(G) Foreign tax credit carryovers Any carryover to or from the taxable year of the discharge for purposes of determining the amount of the credit allowable under section 27.
(2)(A)NOL#
Any net operating loss for the taxable year of the discharge, and any net operating loss carryover to such taxable year.
(2)(B)General business credit#
(3)Amount of reduction#
(A) In general Except as provided in subparagraph (B), the reductions described in paragraph (2) shall be one dollar for each dollar excluded by subsection (a).
(B) Credit carryover reduction The reductions described in subparagraphs (B), (C), and (G) shall be 33⅓ cents for each dollar excluded by subsection (a). The reduction described in subparagraph (F) in any passive activity credit carryover shall be 33⅓ cents for each dollar excluded by subsection (a).
(3)(A)In general#
Except as provided in subparagraph (B), the reductions described in paragraph (2) shall be one dollar for each dollar excluded by subsection (a).
(3)(B)Credit carryover reduction#
The reductions described in subparagraphs (B), (C), and (G) shall be 33⅓ cents for each dollar excluded by subsection (a). The reduction described in subparagraph (F) in any passive activity credit carryover shall be 33⅓ cents for each dollar excluded by subsection (a).
(4)Ordering rules#
(A) Reductions made after determination of tax for year The reductions described in paragraph (2) shall be made after the determination of the tax imposed by this chapter for the taxable year of the discharge.
(B) Reductions under subparagraph (A) or (D) of paragraph (2) The reductions described in subparagraph (A) or (D) of paragraph (2) (as the case may be) shall be made first in the loss for the taxable year of the discharge and then in the carryovers to such taxable year in the order of the taxable years from which each such carryover arose.
(C) Reductions under subparagraphs (B) and (G) of paragraph (2) The reductions described in subparagraphs (B) and (G) of paragraph (2) shall be made in the order in which carryovers are taken into account under this chapter for the taxable year of the discharge.
(4)(A)Reductions made after determination of tax for year#
The reductions described in paragraph (2) shall be made after the determination of the tax imposed by this chapter for the taxable year of the discharge.
(4)(B)Reductions under subparagraph (A) or (D) of paragraph (2)#
The reductions described in subparagraph (A) or (D) of paragraph (2) (as the case may be) shall be made first in the loss for the taxable year of the discharge and then in the carryovers to such taxable year in the order of the taxable years from which each such carryover arose.
(5)Election to apply reduction first against depreciable property#
(A) In general The taxpayer may elect to apply any portion of the reduction referred to in paragraph (1) to the reduction under section 1017 of the basis of the depreciable property of the taxpayer.
(B) Limitation The amount to which an election under subparagraph (A) applies shall not exceed the aggregate adjusted bases of the depreciable property held by the taxpayer as of the beginning of the taxable year following the taxable year in which the discharge occurs.
(C) Other tax attributes not reduced Paragraph (2) shall not apply to any amount to which an election under this paragraph applies.
(5)(A)In general#
The taxpayer may elect to apply any portion of the reduction referred to in paragraph (1) to the reduction under section 1017 of the basis of the depreciable property of the taxpayer.
(5)(B)Limitation#
The amount to which an election under subparagraph (A) applies shall not exceed the aggregate adjusted bases of the depreciable property held by the taxpayer as of the beginning of the taxable year following the taxable year in which the discharge occurs.