Section 382 Limitation Increase for Recognized Built-in Gains

§ 382. Limitation on net operating loss carryforwards and certain built-in losses following ownership change(a) General ruleThe amount of the taxable income of any new loss corporation for any post-change year which may be offset by pre-change losses shall not exceed the section 382 limitation for such year. (b) Section 382 limitationFor purposes of this section—(1) In generalExcept as otherwise provided in this section, the section 382 limitation for any post-change year is an amount equal to—(A) the value of the old loss corporation, multiplied by (B) the long-term tax-exempt rate. (2) Carryforward of unused limitationIf the section 382 limitation for any post-change year exceeds the taxable income of the new loss corporation for such year which was offset by pre-change losses, the section 382 limitation for the next post-change year shall be increased by the amount of such excess. (3) Special rule for post-change year which includes change dateIn the case of any post-change year which includes the change date—(A) Limitation does not apply to taxable income before changeSubsection (a) shall not apply to the portion of the taxable income for such year which is allocable to the period in such year on or before the change date. Except as provided in subsection (h)(5) and in regulations, taxable income shall be allocated ratably to each day in the year. (B) Limitation for period after changeFor purposes of applying the limitation of subsection (a) to the remainder of the taxable income for such year, the section 382 limitation shall be an amount which bears the same ratio to such limitation (determined without regard to this paragraph) as—(i) the number of days in such year after the change date, bears to (ii) the total number of days in such year. (c) Carryforwards disallowed if continuity of business requirements not met(1) In generalExcept as provided in paragraph (2), if the new loss corporation does not continue the business enterprise of the old loss corporation at all times during the 2-year period beginning on the change date, the section 382 limitation for any post-change year shall be zero. (2) Exception for certain gainsThe section 382 limitation for any post-change year shall not be less than the sum of—(A) any increase in such limitation under—(i) subsection (h)(1)(A) for recognized built-in gains for such year, and (ii) subsection (h)(1)(C) for gain recognized by reason of an election under section 338, plus (B) any increase in such limitation under subsection (b)(2) for amounts described in subparagraph (A) which are carried forward to such year. (d) Pre-change loss and post-change yearFor purposes of this section—(1) Pre-change lossThe term “pre-change loss” means—(A) any net operating loss carryforward of the old loss corporation to the taxable year ending with the ownership change or in which the change date occurs, and