A common parent may elect to reattribute to itself a portion of NOL that would otherwise be apportioned to a subsidiary leaving the group. Reattribution is available only to the extent that the parent is subject to loss disallowance with respect to the sale or other disposition of the subsidiary stock. Reattribution is not permitted to the extent the disposed of subsidiary is insolvent. The election should be attached to the consolidated return in the year of the disposition, and delivered to the acquirer prior to the time the acquirer's return is to be filed. Planning and Negotiation Generally, buyers want to purchase assets to avoid unrecorded corporate liabilities and to be able to revalue depreciable assets for tax purposes.
Sellers decide whether to sell assets or stock based on their tax cost.
The proposed regulations may lead both buyer and seller to an asset sale. Another consideration is a seller's right to a reallocate the net operating losses on a stock sale. Given the choice between a disallowed loss on sale of stock or allowable losses on a deemed sale of assets, the seller will want to make this election. Therefore, if for business reasons a stock deal is preferred, the ability of the seller to make a Sec. The following illustrates the implications of the new rules.