pre-change loss
(2) Pre-change loss. The term pre-change loss means (i) Any net operating loss carryforward of the old loss corporation to the taxable year ending on the change date or in which the change date occurs; (ii) Any net operating loss of the old loss corporation for the taxable year in which the ownership change occurs to the extent such loss is allocable to the period in such year on or before the change date; (iii) Any recognized built-in loss for any recognition period taxable year (within the meaning of 382(h)); (iv) Any pre-change capital losses described in 1.383-1T(c)(2)(i) and (ii); (v) Any pre-change credits described in 1.383-1T(c)(3); and (vi) Any section 382 disallowed business interest carryforward. (3) Stock(i) In general. Except as provided in this paragraph (a)(3)(i) and 1.382-2T(f)(18)(ii) and (iii), the term stock means stock other than stock described in section 1504(a)(4). Notwithstanding the preceding sentence, stock that is not described in section 1504(a)(4) solely because it is entitled to vote as a result of dividend arrearages shall be treated as so described and thus shall not be considered stock. Stock described in section 1504(a)(4), however, is not excluded for purposes of determining the value of the loss corporation under section 382(e). The determination of the percentage of stock of any corporation owned by any person shall be made on the basis of the relative fair market value of the stock owned by such person to the total fair market value of the outstanding stock of the corporation. Solely for purposes of determining the percentage of stock owned by a person, each share of all the outstanding shares of stock that have the same material terms is treated as having the same value. Thus, for example, a control premium or blockage discount is disregarded in determining the percentage of stock owned by any person. (ii) Convertible stock. The term stock includes any convertible stock. For rules regarding the treatment of certain convertible stock as an option, see 1.382-4(d)(9)(ii). (4) Testing date(i) In general. Except as provided in paragraph (a)(4)(ii) of this section, a loss corporation is required to determine whether an ownership change has occurred immediately after any owner shift, or issuance or transfer (including an issuance or transfer described in 1.382-4(d)(8)(i) or (ii)) of an option with respect to stock of the loss corporation that is treated as exercised under 1.382-4(d)(2). Each date on which a loss corporation is required to make a determination of whether an ownership change has occurred is referred to as a testing date. All computations of increases in percentage ownership are to be made as of the close of the testing date and any transactions described in this paragraph (a)(4) that occur on that date are treated as occurring simultaneously at the close of the testing date. See 1.382-2T(e)(1) for the definition of owner shift. The term option, as used in this paragraph (a)(4), includes interests that are treated as options under 1.382-4(d)(9). (ii) Exceptions. A loss corporation is not required to determine whether an ownership change has occurred immediately after (A) Any transfer of stock, or an option with respect to stock, of the loss corporation in any of the circumstances described in section 382(l)(3)(B) (death, gift, divorce, etc.); or (B) The transfer of an option described in 1.382-4(d)(11)(i) or (ii) (relating to transfers between persons who are not 5-percent shareholders or between members of certain public groups). (5) Successor corporation. A successor corporation is a distributee or transferee corporation that succeeds to and takes into account items described in section 381(c) from a corporation as the result of an acquisition of assets described in section 381(a). A successor corporation also includes, as the context may require, a corporation which receives an asset or assets from another corporation if the corporation's basis for the asset(s) is determined, directly or indirectly, in whole or in part, by reference to the other corporation's basis and the amount by which basis differs from value is, in the aggregate, material. (6) Predecessor corporation. A predecessor corporation is a distributor or transferor corporation that distributes or transfers its assets to an acquiring corporation in a transaction described in section 381(a). A predecessor corporation also includes, as the context may require, a corporation which transfers an asset or assets to another corporation if the transferee's basis for the asset(s) is determined, directly or indirectly, in whole or in part, by reference to the corporation's basis and the amount by which basis differs from value is, in the aggregate, material. (7) Section 382 disallowed business interest carryforward. The term section 382 disallowed business interest carryforward includes the following items: (i) The loss corporation's disallowed business interest expense carryforwards (as defined in 1.163(j)-1(b)(11)), including disallowed disqualified interest (as defined in 1.163(j)-1(b)(12)), as of the date of the ownership change. (ii) The loss corporation's current-year business interest expense (as defined in 1.163(j)-1(b)(9)) in the change year (as defined in 1.382-6(g)(1)) that is allocable to the pre-change period (as defined in 1.382-6(g)(2)) under 1.382-6(a) or (b) and that becomes disallowed business interest expense (as defined in 1.163(j)-1(b)(10)). (8) Testing period. Notwithstanding the temporal limitations provided in 1.382-2T(d)(3)(i), the testing period for a loss corporation can begin as early as the first day of the first taxable year from which there is a section 382 disallowed business interest carryforward to the first taxable year ending after the testing date.