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TITLE 26-INTERNAL REVENUE CODE PART V-CARRYOVERS Sec. 381. Carryovers in certain corporate acquisitions. 382. Special limitations on net operating loss car- ryovers. ' 383. Special limitations on carryovers of unused in- vestment credits, work incentive program cred- its, foreign taxes, and Capital losses. I AMENDMENTS 1971-Pub. L. 92-178, title III, § 302(b), Dec. 10, 1971, 85 Stat. 521, added item 383. § 381. Carryovers in certain corporate acquisitions (a) General rule In the case of the acquisition of assets of a corporation by another corporation- (1) in a distribution to such other corpora- tion to which section 332 (relating to liquida- tions of subsidiaries) applies, except in a cqse In which the basis of the assets distributed is deLermined under section 334(b)(2); or (2) in a transfer to which section 361 (relat- ing to nonrecognition of gain or loss to corpo- rations) applies, but only if the transfer Is in connection with a reorganization described in subparagraphs (A), (C), (D) (but only if the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met), or (F) of section 368(a)(1), the acquiring corporation shall succeed to and take into account, as of the close of the day of distribution or transfer, the items described in subsection (W) of the distributor or transferor corporation, subject to the conditions and limi- tations specified in subsections (b) and (c). (b) Operating rules Except in the case of an acquisition in con- nection with a reorganization described in sub- paragraph (F) of section 368(a)(1)- (1) The taxable year of the distributor or transferor corporation shall end on the date of distribution or transfer. (2) For purposes of this section, th(e date of distribution or transfer shall be the day on which the distribution or transfer is complet- ed; except that, under regulations prescribed by the Secretary, the date when substantially all of the property has been distributed or transferred may be used if the distributor or transferor corporation ceases all operations, other than liquidating activities, after such date. (3) The corporation acquiring property in a distribution or transfer described in subsec- tion (a) shall not be entitled to carry back a net operating loss or a net capital loss for a taxable year ending after the date of distribu- tion or transfer to a taxable year of the dis- tributor or transferor corporation. (c) Items of the distributor or transferor corporation The Items referred to in subsection (a) are: (1) Net operating loss carryovers The net operating loss carryovers deter- mined under section 172, subject to the fol- lowing conditions and limitations: (A) the taxable year of the acquiring cor- poration to which the net operating loss 'So in original. Does not conform to section catch- line. carryovers of the distributor or transferor corporation are first carried shall be the first taxable year ending after the date of distribution or transfer. (B) In determining the net operating loss deduction, the portion of such deduction at- tributable to the net operating loss car- ryovers of the distributor or transferor cor- poration to the first taxable year of the ac- quiring corporation ending after the date of distribution or transfer shall be limited to an amount which bears the same ratio to the taxable income (determined without regard to a net operating loss deduction) of the acquiring corporation in such taxable year as the number of days in the taxable year after the date of distribution or trans- fer bears to the total number of days in the taxable year. (C) For the purpose of determining the amount of the net operating loss carryovers under section 172(b)(2), a net operating loss for a taxable year (hereinafter in this sub- paragraph referred to as the "loss year") of a distributor or transferor corporation which ends on or before the end of a loss year of the acquiring corporation shall be considered to be a net operating loss for a year prior to such loss year of the acquiring corporation. For the same purpose, the tax- able income for a "prior taxable year" (as the term is used in section 172(b)(2)) shall be computed as provided in such section; except that, if the date of distribution or transfer is on a day other than the last day of a taxable year of the acquiring corpora- tion- (I) such taxable year shall (for the pur- pose of this subparagraph only) be consid- ered to be 2 taxable years (hereinafter in this subparagraph referred to as the "pre- acquisition part year" and the "post-ac- quisition part year"); (ii) the pre-acquisition part year shall begin on the same day as such taxable year begins and shall end on the date of distribution or transfer; (iiI) the post-acquisition part year shall begin on the day following the date of dis- tribution or transfer and shall end on the same day as the end of such taxable year; (iv) the taxable income for such taxable year (computed with the modifications specified in section 172(b)(2)(A) but with- out a net operating loss deduction) shall be divided between the pre-acquisition part year and the post-acquisition part year in proportion to the number of days in each; (v) the net operating loss deduction for the pre-acquisition part year shall be de- termined as provided in section 172(b)(2)(B), but without regard to a net operating loss year of the distributor or transferor corporation; and (vi) the net operating loss deduction for the post-acquisition part year shall be de- termined as provided in section 172(b)(2)(B). (2) Earnings and profits In the case of a distribution or transfer de- scribed in subsection (a)- § 381 Page 274