title 11 or similar case

(5) Title 11 or similar case (A) In general Subsection (a) shall not apply to any ownership change if— (i) the old loss corporation is (immediately before such ownership change) under the jurisdiction of the court in a title 11 or similar case, and (ii) the shareholders and creditors of the old loss corporation (determined immediately before such ownership change) own (after such ownership change and as a result of being shareholders or creditors immediately before such change) stock of the new loss corporation (or stock of a controlling corporation if also in bankruptcy) which meets the requirements of section 1504(a)(2) (determined by substituting “50 percent” for “80 percent” each place it appears). (B) Reduction for interest payments to creditors becoming shareholders In any case to which subparagraph (A) applies, the pre-change losses and excess credits (within the meaning of section 383(a)(2) ) which may be carried to a post-change year shall be computed as if no deduction was allowable under this chapter for the interest paid or accrued by the old loss corporation on indebtedness which was converted into stock pursuant to title 11 or similar case during— (i) any taxable year ending during the 3-year period preceding the taxable year in which the ownership change occurs, and (ii) the period of the taxable year in which the ownership change occurs on or before the change date. (C) Coordination with section 108 In applying section 108(e)(8) to any case to which subparagraph (A) applies, there shall not be taken into account any indebtedness for interest described in subparagraph (B). (D) Section 382 limitation zero if another change within 2 years If, during the 2-year period immediately following an ownership change to which this paragraph applies, an ownership change of the new loss corporation occurs, this paragraph shall not apply and the section 382 limitation with respect to the 2nd ownership change for any post-change year ending after the change date of the 2nd ownership change shall be zero. (E) Only certain stock taken into account For purposes of subparagraph (A)(ii), stock transferred to a creditor shall be taken into account only to the extent such stock is transferred in satisfaction of indebtedness and only if such indebtedness— (i) was held by the creditor at least 18 months before the date of the filing of the title 11 or similar case, or (ii) arose in the ordinary course of the trade or business of the old loss corporation and is held by the person who at all times held the beneficial interest in such indebtedness. (F) Title 11 or similar case For purposes of this paragraph, the term “title 11 or similar case” has the meaning given such term by section 368(a)(3)(A). (G) Election not to have paragraph apply A new loss corporation may elect, subject to such terms and conditions as the Secretary may prescribe, not to have the provisions of this paragraph apply.


26 USC § 382(l)(5)

Scoping language

For purposes of this paragraph
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