KPMG PPT - Tax Executives Institute, Inc.

Unified Loss Rules
Attribute Reduction Rule
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If the total amount of attribute reduction is lower than the attributes available, the
taxpayer can elect which attributes to reduce.
► If no election is made, the attributes will be reduced by category beginning
with capital loss carryovers.
► Within a category, losses are reduced based on vintage.
► Other reductions are generally reduced proportionally within the category.
If the total amount of attribute reduction is higher than the attributes available, the
remaining reduction amount is suspended to the extent of any liabilities of the
subsidiary (or a lower-tier subsidiary) that have not been taken into account for tax
purposes before the transfer.
► The suspended amount is applied to reduce any amount that would be
deductible or capitalizable as a result of the liability later being taken into
account.
► If the amount of the required attribute reduction exceeds the subsidiary’s
liability, the excess is “black hole.”
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