149. Application of 1990 Loss Utilisation Restrictions to Pre-1990 Losses

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In a recent decision (DStR 1998, 1087 - 11 February 1998), the Federal Tax Court has confirmed the tax authorities' interpretation as to the effective date of the 1990 loss carryforward restrictions, holding that the assessment period (calendar year) in which losses accrued is irrelevant to the operation of the new restrictions, which apply generally to assessment periods from 1990 on (and to assessment periods as early as 1988 if the transaction leading to the loss of economic identity was entered into after 23 June 1988).

In the case decided, the transaction leading to the loss of economic identity under the 1990 version of the statute (more than 75 % change in ownership) took place in 1987, hence the new restrictions applied starting with the 1990 assessment year. The taxpayer corporation sought to deduct loss carried