Pre-change consolidated attribute
(e) Pre-change consolidated attribute(1) Defined. A pre-change consolidated attribute of a loss group is (i) Any loss described in paragraph (c)(1)(i) or (ii) of this section (relating to the definition of loss group) that is allocable to the period ending on or before the change date; and (ii) Any recognized built-in loss of the loss group. (2) Example(i) Facts. The L group has a consolidated net operating loss arising in Year 1 that is carried over to Year 2. The L loss group has an ownership change at the beginning of Year 2. (ii) Analysis. The net operating loss carryover of the L loss group from Year 1 is a pre-change consolidated attribute because the L group was entitled to use the loss in Year 2 and therefore the loss was described in paragraph (c)(1)(i) of this section. Under paragraph (a)(2)(i) of this section, the amount of consolidated taxable income of the L group for Year 2 that may be offset by this loss carryover may not exceed the consolidated section 382 limitation of the L group for that year. See 1.1502-93 for rules relating to the computation of the consolidated section 382 limitation. (iii) Business interest expense. The facts are the same as in the Example in paragraph (e)(2)(i) of this section, except that, rather than a consolidated net operating loss, a member of the L group pays or accrues a business interest expense in Year 1 for which a deduction is disallowed in that year under section 163(j) and 1.163(j)-2(b). The disallowed business interest expense is carried over to Year 2 under section 163(j)(2) and 1.163(j)-2(c). Thus, the disallowed business interest expense carryforward is a pre-change loss. Under section 163(j), the L loss group is entitled to deduct the carryforward in Year 2; however, the amount of consolidated taxable income of the L group for Year 2 that may be offset by this carryforward may not exceed the consolidated section 382 limitation of the L group for that year. See 1.1502-98(b) (providing that 1.1502-91 through 1.1502-96 apply section 382 to business interest expense, with appropriate adjustments).