(a) In general. Except as provided in paragraphs (b) and (c) of this section, Secs. 1.1502-91 through 1.1502-96 and Sec. 1.1502-98 apply to any testing date on or after June 25, 1999. Sections 1.1502-94 through 1.1502-96 also apply to a corporation that becomes a member of a group or ceases to be a member of a group (or loss subgroup) on any date on or after June 25, 1999.
(b) Special rules--(1) Election to treat subgroup parent requirement as satisfied. Section 1.1502-91(d)(4), Sec. 1.1502-91(d)(7), Example 4, Sec. 1.1502-92(b)(1)(iii), Sec. 1.1502-92(b)(2), Example 5, the last two sentences of Sec. 1.1502-95(b)(3), Sec. 1.1502-95(d)(2)(i), and Sec. 1.1502-96(e)(all of which relate to the election under Sec. 1.1502-91(d)(4) to treat the loss subgroup parent requirement as satisfied) apply to corporations that become members of a consolidated group in taxable years for which the due date of the income tax return (without extensions) is after June 25, 1999.
(1) Election to treat subgroup parent requirement as satisfied. Section 1.1502-91(d)(4), Sec. 1.1502-91(d)(7), Example 4, Sec. 1.1502-92(b)(1)(iii), Sec. 1.1502-92(b)(2), Example 5, the last two sentences of Sec. 1.1502-95(b)(3), Sec. 1.1502-95(d)(2)(i), and Sec. 1.1502-96(e)(all of which relate to the election under Sec. 1.1502-91(d)(4) to treat the loss subgroup parent requirement as satisfied) apply to corporations that become members of a consolidated group in taxable years for which the due date of the income tax return (without extensions) is after June 25, 1999.
(2) Principal purpose of avoiding a limitation. The third sentence of Sec. 1.1502-91(d)(5) (relating to members excluded from a loss subgroup) applies to corporations that become members of a consolidated group on or after June 25, 1999.
(3) Ceasing to be a member of a loss subgroup--(i) Ownership change of a loss subgroup. Section 1.1502-95(d)(2)(ii) and Sec. 1.1502-95(d)(3), Example 3 apply to corporations that cease to bear a relationship described in section 1504(a)(1) to a loss subgroup parent in taxable years for which the due date of the income tax return (without extensions) is after June 25, 1999.
(i) Ownership change of a loss subgroup. Section 1.1502-95(d)(2)(ii) and Sec. 1.1502-95(d)(3), Example 3 apply to corporations that cease to bear a relationship described in section 1504(a)(1) to a loss subgroup parent in taxable years for which the due date of the income tax return (without extensions) is after June 25, 1999.
(ii) Expiration of 5-year period. Section 1.1502-95(d)(2)(iii) applies with respect to the day after the last day of any 5 consecutive year period described in that section that ends in a taxable year for which the due date of the income tax return (without extensions) is after June 25, 1999.
(4) Reattribution of losses under Sec. 1.1502-36(d)(6). Section 1.1502-96(d) applies to reattributions of net operating loss carryovers, capital loss carryovers, and deferred deductions in connection with a transfer of stock to which Sec. 1.1502-36 applies, and the election under Sec. 1.1502-96(d)(5) (relating to an election to reattribute section 382 limitation) can be made with an election under Sec. 1.1502-36(d)(6) to reattribute a loss to the common parent that is filed at the time and in the manner provided in Sec. 1.1502-36(e)(5)(x).
(5) Election to apportion net unrealized built-in gain. In the case of corporations that cease to be members of a loss group (or loss subgroup) before June 25, 1999 in a taxable year for which the due date of the income tax return (without extensions) is after June 25, 1999, Sec. 1.1502-95(a), (b), (c), and (f) apply to those corporations if the common parent makes the election described in the second sentence of paragraph (c)(1) of Sec. 1.1502-95 in the time and manner prescribed in paragraph (f) of Sec. 1.1502-95.
(c) Testing period may include a period beginning before June 25, 1999--
(1) In general. A testing period for purposes of Secs. 1.1502-91 through 1.1502-96 and 1.1502-98 may include a period beginning before June 25, 1999. Thus, for example, in applying Sec. 1.1502-92(b)(1)(i)(relating to the determination of an ownership change of a loss group), the determination of the lowest percentage of ownership interest of any 5-percent shareholder of the common parent during a testing period ending on a testing date occurring on or after June 25, 1999 takes into account the period beginning before June 25, 1999, except to the extent that the period is more than 3 years before the testing date or is otherwise before the beginning of the testing period. See Sec. 1.1502-92(b)(1).
(2) Transition rule for net unrealized built-in loss. A loss group (or loss subgroup) that has a net unrealized built-in loss on a testing date on or after June 25, 1999 may apply Sec. 1.1502-91A(g) (and Sec. 1.1502-96A(a) as it relates to Sec. 1.1502-91A(g)) for the period ending on the day before June 25, 1999 to determine under Sec. 1.382-2T(d)(ii)(A) the earliest date that its testing period begins (treating the day before June 25, 1999 as the end of a taxable year.) Thus, for example, if a consolidated group with no net operating losses has a net unrealized built-in loss determined under Sec. 1.1502-91(g) on a testing date after June 25, 1999, but, under Sec. 1.1502-91A(g), does not have a net unrealized built-in loss for the period ending on the day before June 25, 1999, the group's testing period begins no earlier than June 25, 1999. [T.D. 8824, 64 FR 36174, July 2, 1999, as amended by T.D. 9424, 73 FR 53986, Sept. 17, 2008]