1983 | 1984 | 1985 | |
NT1 | $(60) | $(140) | $15 |
T1 | 1,000 | 500 | 750 |
NT2 | (90) | (220) | 150 |
T2 | (300) | 400 | 250 |
In 1983, NT1, in addition to its other business activities, acted as a collection agency for T1. Deductions attributable to those activities exceeded gross income attributable to those activities by $70. NT1's other activities generated a $10 gain. In 1984 and 1985, NT1 acted as a collection agency for T1 as its sole activity.
(i) T1's tentative taxable income: | ||
T1's tentative taxable income (before the application of paragraph (f) of this section | $1,000 | |
Less: | ||
T2's tentative taxable loss | $300 | |
NT1's functionally related loss (limited by NT1's overall loss) | 60 | 360 |
T1's tentative taxable income for 1983 | 640 |
T1's tentative taxable income (before the application of paragraph (f) of this section) | $500 |
Less: | |
T1's allocable portion of NT1's functionally related loss (140 * 500/(500 + 400)) | 78 |
T1's tentative taxable income for 1984 | 422 |
(ii) T2's tentative taxable income: | |
T2's tentative taxable income (before the application of paragraph (f) of this section | 400 |
Less: | |
T2's allocable portion of NT1's functionally related loss (140 * 400/(500 + 400)) | 62 |
T2's tentative taxable income for 1984 | 338 |
1983 | 1984 | 1985 | |
T | $100 | $0 | $(200) |
NT1 | 200 | 0 | 100 |
NT2 | (20) | 20 | 0 |
1983 | 1984 | 1985 | |
T | $100 | $0 | $0 |
NT | 0 | 40 | (40) |
1983 | 1984 | 1985 | |
T1 | (50) | 100 | 30 |
T2 | (50) | (80) | (25) |
NT1 | (50) | (40) | (99) |
NT2 | 120 | 30 | 100 |
26 C.F.R. §1.1502-42
Sec. 1502, 7805, Internal Revenue Code of 1954 (68A Stat. 367 and 917; (26 U.S.C. 1502 and 7805 )