OAR 150-317-0660: Computation of Taxable Income; Excess Loss Accounts

An Oregon subtraction is allowed for the amount of excess loss account included in federal taxable income under the provisions of Treasury Regulation subsection 1.1502-19 if: (1) The losses did not offset unitary income in the year incurred; or (2) The excess losses were attributable to losses incurred in tax years beginning prior to January 1, 1986. Example 1: Corporation P purchased 100 percent of the stock of Corporation S for $1,000 on January 1, 1986. P and S were not unitary and S had negative earning and profits (E&P) of $1,000 in the tax year ending December 31, 1986. They filed a consolidated federal and separate Oregon returns in 1986. P and S were unitary and filed consolidated federal and Oregon returns in 1987. During 1987, S realized another negative E&P of $1,000. P sold S to an unrelated buyer for $1,000 on January 1, 1988. [Table not included. See PDF link below.] Example 2: Same facts as Example (1), except that all events took place two years earlier. The 1986 Oregon return would show a subtraction of $2,000,000 because both losses, even the 1985 loss which did offset unitary income, were incurred in tax years beginning before January 1, 1986. [ED. NOTE: To view attachments referenced in rule text, click here to view rule.]