[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.825-2]

[Page 723-724]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.825-2  Unused loss carryovers and carrybacks.

    (a) Years to which loss may be carried--(1) In general. In order to 
determine its unused loss deduction for any taxable year, a mutual 
insurance company taxable under section 821(a) must first determine the 
part of any unused losses for any preceding or succeeding taxable years 
which are carryovers or carrybacks to the taxable year in issue. An 
unused loss is to be an unused loss carryback to each of the 3 taxable 
years preceding the loss year, and an unused loss carryover to each of 
the 5 taxable years following the loss year, subject to the limitations 
provided in section 825(g) and subparagraph (2) of this paragraph.
    (2) Limitations. An unused loss may not be carried:
    (i) To or from any taxable year beginning before January 1, 1963,
    (ii) To or from any taxable year for which the taxpayer is not 
subject to the tax imposed by section 821(a), nor
    (iii) To any taxable year if, between the loss year and such taxable 
year, there is an intervening taxable year for which the taxpayer was 
not subject to the tax imposed by section 821(a).
    (3) Periods of less than 12 months. A fractional part of a year 
which is a taxable year under sections 441(b) and 7701(a)(23) is a 
preceding or a succeeding taxable year for the purpose of determining 
under section 825 the first, second, etc., preceding or succeeding 
taxable year.
    (b) Loss year defined. The term ``loss year'' as used in this 
section means any taxable year for which a company subject to the tax 
imposed by section 821(a) has an unused loss in excess of zero.
    (c) Amount of carrybacks and carryovers. Section 825(e) provides 
that in the case of a loss year for a company

[[Page 724]]

taxable under section 821(a), the entire amount of the unused loss shall 
be carried to the earliest taxable year to which such loss may be 
carried under section 825(d) (subject to the limitations of section 
825(g)). The amount of the unused loss carried to each of the other 
taxable years to which such loss may be carried under section 825(d) 
following such earliest taxable year shall be the excess (if any) of 
such loss over the sum of the offsets for each taxable year preceding 
the taxable year to which the unused loss is carried.
    (d) Offset defined--(1) In general. Section 825(f) defines the term 
``offset'' and provides that the taxable year to which an unused loss is 
carried shall be referred to as the ``offset year''. The definition of 
the term offset in the case of an unused loss carryback to an offset 
year, differs from the definition of such term in the case of an unused 
loss carryover to an offset year.
    (2) Offset in case of carryback. In the case of an unused loss 
carryback from the loss year to the offset year, the offset is the 
mutual insurance company taxable income for the offset year, computed 
without regard to any unused loss carryback from the loss year or any 
taxable year thereafter.
    (3) Offset in case of carryover. In the case of an unused loss 
carryover from the loss year to the offset year, the offset is equal to 
the sum of:
    (i) The amount required to be subtracted from the protection against 
loss account under section 824(d)(1)(C) (relating to amounts equal to 
the unused loss carryovers to the offset year), plus
    (ii) The mutual insurance company taxable income for the taxable 
year, computed without regard to any unused loss carryback or carryover 
from the loss year or any taxable year thereafter.

[T.D. 6681, 28 FR 11123, Oct. 17, 1963]