Covered Assets
(B) Covered Assets. If, immediately after a Taxable Transfer, an asset is not subject to a Loss Guarantee but the New Entity or the Acquiring has the right to designate specific assets that will be subject to the Loss Guarantee, the New Entity or the Acquiring must treat any asset so designated as having been subject to the Loss Guarantee at the time of the Taxable Transfer. The New Entity or the Acquiring must adjust its basis in the Covered Assets and in its other acquired assets to reflect the designation in the manner provided by paragraph (d)(2) of this section. The New Entity or the Acquiring must make appropriate adjustments in subsequent taxable years if the designation is made after the New Entity or the Acquiring files its first post-transfer federal income tax return or the due date of that return (including extensions) has passed.