[Code of Federal Regulations]
[Title 26, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.382-5]

[Page 502-503]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.382-5  Section 382 limitation.

    (a) Scope. Following an ownership change, the section 382 limitation 
for any post-change year is an amount equal to the value of the loss 
corporation multiplied by the long-term tax-exempt rate that applies 
with respect to the ownership change, and adjusted as required by 
section 382 and the regulations thereunder. See, for example, section 
382(b)(2) (relating to the carryforward of unused section 382 
limitation), section 382(b)(3)(B) (relating to the section 382 
limitation for the post-change year that includes the change date), 
section 382(m)(2) (relating to short taxable years), and section 382(h) 
(relating to recognized built-in gains and section 338 gains).
    (b) Computation of value. [Reserved]
    (c) Short taxable year. The section 382 limitation for any post-
change year that is less than 365 days is the amount that bears the same 
ratio to the section 382 limitation determined under section 382(b)(1) 
as the number of days in the post-change year bears to 365. The section 
382 limitation, as so determined, is adjusted as required by section 382 
and the regulations thereunder. This paragraph (c) does not apply to a 
52-53 week taxable year that is less than 365 days unless a return is 
required under section 443 (relating to short periods) for such year.
    (d) Successive ownership changes and absorption of a section 382 
limitation--(1) In general. If a loss corporation has two (or more) 
ownership changes, any losses attributable to the period preceding the 
earlier ownership change are treated as pre-change losses with respect 
to both ownership changes. Thus, the later ownership change may result 
in a lesser (but never in a greater) section 382 limitation with respect 
to such losses. In any case, the amount of taxable income for any post-
change year that can be offset by pre-change losses may not exceed the 
section 382 limitation for such ownership change, reduced by the amount 
of taxable income offset by pre-change losses subject to any earlier 
ownership change(s).
    (2) Recognized built-in gains and losses. [Reserved]
    (3) Effective date. This paragraph (d) applies to taxable years of a 
loss corporation beginning on or after January 1, 1997.
    (e) Controlled groups. See Sec. 1.382-8 for rules for determining 
the value of a loss corporation that is a member of a controlled group.
    (f) Effective date. Except as otherwise provided, this section 
applies to a loss

[[Page 503]]

corporation that has an ownership change to which section 382(a), as 
amended by the Tax Reform Act of 1986, applies.

[T.D. 8679, 61 FR 33316, June 27, 1996, as amended by T.D. 8825, 64 FR 
36178, July 2, 1999]