[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.172-8]

[Page 188-189]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.172-8  Net operating loss carryovers for regulated transportation 
corporations.

    (a) In general. A net operating loss sustained in a taxable year 
ending before January 1, 1976, shall be a carryover to the 7 succeeding 
taxable years if the taxpayer is a regulated transportation corporation 
(as defined in paragraph (b) of this section) for the loss year and for 
the 6th and 7th succeeding taxable years. If, however, the taxpayer is a 
regulated transportation corporation for the loss year and for the 6th 
succeeding taxable year, but not for the 7th succeeding taxable year, 
then the loss shall be a carryover to the 6 succeeding taxable years. If 
the taxpayer is not a regulated transportation corporation for the 6th 
succeeding taxable year then this section shall not apply. A net 
operating loss sustained in a taxable year ending after December 31, 
1975, shall be a carryover to the 15 succeeding taxable years.
    (b) Regulated transportation corporations. A corporation is a 
regulated transportation corporation for a taxable year if it is 
included within one or more of the following categories:
    (1) Eighty percent or more of the corporation's gross income 
(computed without regard to dividends and capital gains and losses) for 
such taxable year is income from transportation sources described in 
paragraph (c) of this section.
    (2) The corporation is a railroad corporation, subject to Part I of 
the Interstate Commerce Act, which is either a lessor railroad 
corporation described in section 7701(a)(33)(G) or a common parent 
railroad corporation described in section 7701(a)(33)(H).
    (3) The corporation is a member of a regulated transportation system 
for the taxable year. For purposes of this section, a member of a 
regulated transportation system for a taxable year means a member of an 
affiliated group of corporations making a consolidated return for such 
year, if 80 percent or more of the sum of the gross incomes of the 
members of the affiliated group for such year (computed without regard 
to dividends, capital gains and losses, or eliminations for intercompany 
transactions) is derived from transportation sources described in 
paragraph (c) of this section. For purposes of this subparagraph, income 
derived by a corporation described in subparagraph (2) of this paragraph 
from leases described in section 7701(a)(33)(G) shall be considered as 
income from transportation sources described in paragraph (c) of this 
section.
    (c) Transportation sources. For purposes of this section, income 
from ``transportation sources'' means income received directly in 
consideration for transportation services, and income from the 
furnishing or sale of essential

[[Page 189]]

facilities, products, and other services which are directly necessary 
and incidental to the furnishing of transportation services. For 
purposes of the preceding sentence, the term transportation services 
means:
    (1) Transportation by railroad as a common carrier subject to the 
jurisdiction of the Interstate Commerce Commission;
    (2)(i) Transportation, which is not included in subparagraph (1) of 
this paragraph:
    (a) On an intrastate, suburban, municipal, or interurban electric 
railroad,
    (b) On an intrastate, municipal, or suburban trackless trolley 
system,
    (c) On a municipal or suburban bus system, or
    (d) By motor vehicle not otherwise included in this subparagraph, if 
the rates for the furnishing or sale of such transportation are 
established or approved by a regulatory body described in section 
7701(a)(33)(A);
    (ii) In the case of a corporation which establishes to the 
satisfaction of the district director that:
    (a) Its revenue from regulated rates from transportation services 
described in subdivision (i) of this subparagraph and its revenue 
derived from unregulated rates are derived from its operation of a 
single interconnected and coordinated system or from the operation of 
more than one such system, and
    (b) The unregulated rates have been and are substantially as 
favorable to users and consumers as are the regulated rates, 
transportation, which is not included in subparagraph (1) of this 
paragraph, from which such revenue from unreg ulated rates is derived.
    (3) Transportation by air as a common carrier subject to the 
jurisdiction of the Civil Aeronautics Board; and
    (4) Transportation by water by common carrier subject to the 
jurisdiction of either the Interstate Commerce Commission under Part III 
of the Interstate Commerce Act (54 Stat. 929), or the Federal Maritime 
Board under the Intercoastal Shipping Act, 1933 (52 Stat. 965).
    (d) Corporate acquisitions. This section shall apply to a carryover 
of a net operating loss sustained by a regulated transportation 
corporation (as defined in paragraph (b) of this section) to which an 
acquiring corporation succeeds under section 381(a) only if the 
acquiring corporation is a regulated transportation corporation (as 
defined in paragraph (b) of this section):
    (1) For the sixth succeeding taxable year in the case of a carryover 
to the sixth succeeding taxable year, and
    (2) For the sixth and seventh succeeding taxable years in the case 
of a carryover to the seventh succeeding taxable year.

[T.D. 6862, 30 FR 14430, Nov. 18, 1965, as amended by T.D. 8107, 51 FR 
43346, Dec. 2, 1986]