(1) Federal law applies to capital losses.
(a) Capital losses are deducted to the extent
of capital gains in the same tax year.
(b) Capital losses in excess of capital gains
must be carried back three tax years. Capital losses that do not fully offset
capital gains for a year to which the losses are carried back may be carried
forward for up to five tax years after the tax year in which the capital losses
were incurred.
(c) Capital loss
carrybacks and carryovers can only be used to reduce capital gains in the tax
years to which they are carried.
(d) A capital loss carryback cannot be used
to create or increase a net loss in the tax year to which it is
carried.
(e) If a capital loss is
not carried to tax years in the order provided in subsections (1)(b) through
(1)(d), the amount of net capital loss that should have been utilized to
decrease capital gain net income cannot be used to offset capital gains in
other taxable years.
(2)
Oregon provisions, such as the requirement that corporations be unitary to be
included in the consolidated Oregon return and the apportionment and allocation
provisions, may result in differences between the Oregon and federal capital
loss deductions and carryovers.
(a) A federal
capital loss deduction used to determine a taxpayer's federal taxable income or
loss must be added to the taxpayer's taxable income or loss determined pursuant
to ORS
317.010(10)
before calculating the Oregon capital loss deduction using the provisions of
this rule.
Example 1: In tax year 2019, Corporation XYZ had an Oregon
apportionment percentage of 25 percent. In the same tax year, Corporation XYZ
realized an apportionable capital loss of $2,000. Consequently, $500 ($2,000 x
25 percent) of the capital loss is apportioned to Oregon. Corporation XYZ had
no capital gain income in the past three tax years. The result is that
Corporation XYZ can carry forward its $500 capital loss five tax years for
Oregon tax purposes.
In tax year 2020, Corporation XYZ had an Oregon apportionment
percentage of 10 percent. Corporation XYZ claimed a federal capital loss
deduction of $2,000 and federal capital gains of $4,000 on its federal tax
return based on its tax year 2019 capital loss. Corporation XYZ computes its
Oregon capital loss deduction by first adding $2,000 to its federal taxable
income on its Oregon tax return. Corporation XYZ is then allowed to subtract
$400 ($4,000 x 10 percent) of the 2019 capital loss on its Oregon tax return
because $400 of the tax year 2020 capital gain was apportioned to Oregon.
Corporation XYZ now has $100 of capital losses to carry forward to the
remaining allowable future tax years for Oregon purposes.
Example 2: Corporation EDF is commercially domiciled in
California. In tax year 2019, Corporation EDF had an Oregon apportionment
percentage of 25 percent. In the same tax year, Corporation EDF realized a
non-apportionable capital loss of $2,000 from the sale of a collectible sled.
None of the capital loss is apportioned to Oregon. For federal tax purposes,
Corporation EDF properly carries forward the entire capital loss to tax year
2020. Corporation EDF adds $2,000 to its federal taxable income on its Oregon
tax return. Corporation EDF subtracts none of the capital loss on its Oregon
tax return because none of the capital loss is allocated or apportioned to
Oregon and so Corporation EDF has zero carryforward.
(b) When a corporation or consolidated group
of corporations is taxable within and without this state, its Oregon net
capital loss carryback and carryover must be computed using the allocation or
apportionment provisions. The Oregon capital loss is computed using the
apportionment factor for the tax year of the loss if the loss is apportionable
and not allocated. The capital loss is applied to the Oregon capital gains for
the year of carryback or carryover. Oregon capital gains are computed using the
apportionment factor for the tax year of the gain if the gain is apportionable.
Example 3: Corporation X has a federal net capital loss of
$3,000 for2023. X's apportionment factor for 2023 is 40 percent. All of
Corporation X's capital gains and losses are apportionable under ORS
314.610(1). In
2020, X had a federal net capital gain of $1,000 and its Oregon apportionment
factor was 50 percent. X has a $1,200 ($3000 x 40 percent) Oregon net capital
loss available for carryback to 2020. X will deduct $500 ($1000 x 50 percent)
on the 2020 return and must carry the remaining $700 forward to other tax
years.
(c) Oregon net
capital losses that are attributed to corporations that continue to be included
in the same consolidated Oregon return may be deducted fully against the Oregon
consolidated net capital gain of the tax years to which such losses are
carried.
Example 4: Corporations X and Y filed a consolidated Oregon
return in 2023 reporting a net capital loss of $5,000 that is attributable to
Y. The consolidated apportionment factor for 2023 is 40 percent. In 2020, X and
Y filed a consolidated Oregon return reporting a net capital gain of $10,000
attributable to X. The consolidated Oregon apportionment factor in 2020 was 25
percent. All of Corporations X and Y's gains and losses were apportionable and
not allocated. The Oregon capital loss carryback of $2,000 ($5,000 x 40
percent) from 2023 is fully deductible in 2020 because it does not exceed the
Oregon consolidated net capital gain of $2,500 ($10,000 x 25 percent).
(3) If a corporation is
included in a combined return, separate return or in a different consolidated
return in the year of the capital loss and the capital loss is carried into a
year when a consolidated Oregon return is filed, the Oregon capital loss
carryover may be subject to the federal separate return limitation year (SRLY)
limitations in Treas. Reg. Sec. 1.1502-22.
(a)
If a net capital loss is reported on a separate Oregon return by a corporation
doing business only in Oregon, the SRLY limitation applies if the loss is
carried to a tax year in which a consolidated return is filed, apportionment is
not required, and the corporation with the loss (the limited member) is not the
parent corporation. To compute the Oregon SRLY limitation, first recompute the
consolidated net capital gain by excluding the capital gains and losses and the
IRC Sec. 1231 gains and losses of the limited member. Then subtract the
recomputed consolidated net capital gain from the total consolidated net
capital gain (computed without regard to any net capital loss carryover or
carrybacks).
Example 5: Corporation R filed a separate Oregon return for
2022 reflecting an Oregon net capital loss of $3,000. Corporation R did not
have net capital gains in any of the prior three years. For 2023, Corporation R
was included in a consolidated Oregon return with Corporations S and T. The
consolidated group was not subject to the apportionment provisions. See ED NOTE
for example table.
(b) If a
corporation is included in a consolidated Oregon return in the year of the
consolidated net capital loss and files a separate Oregon return or is included
in a different consolidated Oregon return in the year to which the net capital
loss is carried, the Oregon consolidated net capital loss is attributed to the
corporations with net capital losses for purposes of determining the allowable
net capital loss carryover. The portion of an Oregon consolidated net capital
loss attributable to a member of a consolidated group is an amount equal to
such Oregon consolidated net capital loss multiplied by a fraction, the
numerator of which is the net capital loss of such member and the denominator
of which is the sum of the net capital losses of those members of the
consolidated group having net capital losses.
Example 6: X Corporation and unitary subsidiaries Y and Z filed
a consolidated Oregon return for 2022, their first year in business. X had a
$3,000 capital loss, Y had a $2,000 capital gain, and Z had a $1,000 capital
loss (consolidated net capital loss of $2,000). The 2022 Oregon apportionment
factor for the consolidated group is 60 percent. On December 31, 2022, X
Corporation sold 100 percent of Z's stock to an outside investor. The capital
loss that can be carried forward to the 2023 consolidated return of X and Y is
computed in the table as follows: See ED NOTE for example table.
(c) If corporations carry their
net capital losses to a tax year in which separate tax returns are filed, the
net capital losses can be deducted by each corporation only if a net capital
gain is shown on the separate tax return. The net capital loss deduction is
further limited by the amount of the net capital gain attributable to Oregon
based on the Oregon apportionment factor.
Example 7: Assume the same facts as in Example 6. The 2023
separate Oregon return of Z shows a net capital gain of $200 with an Oregon
apportionment factor of 50 percent. The net capital loss deduction allowed is
$100 ($200 x 50 percent). Z has a net capital loss carryover to 2024 of
$200.
(d) If a group of
unitary corporations, taxable within and without this state, filed a
consolidated return for the year of the net capital loss and carries the net
capital loss after apportionment back to a year in which a combined return is
filed, the net capital loss must be allocated among the corporations as
provided under the SRLY limitations in Treas. Reg. Sec. 1.1502-22. The net
capital gain of the unitary group in the combined year must be apportioned
among the corporations based on each corporation's Oregon apportionment
percentage.
(4) If a
corporation, taxable within and without this state, filed a separate return or
was included in a different consolidated return for the year of the net capital
loss and carries the net capital loss after apportionment to a year in which a
consolidated return is filed, the net capital loss can be deducted only to the
extent that the same corporation has a net capital gain which is attributed to
Oregon. If the consolidated group in the carryover year is subject to the
apportionment provisions, the net capital gain of the member must be attributed
to Oregon based on the consolidated Oregon apportionment factor.
Example 8: In its first tax year 2022, B Corporation had a net
capital loss of $6,000. Because of its 50 percent Oregon apportionment factor,
$3,000 ($6,000 x 50 percent) of the loss is apportioned to Oregon. On January
1, 2023, 100 percent of B's stock was purchased by P Corporation. Because they
were unitary, P and B file a 2023 consolidated Oregon return that includes B's
net capital gain of $1,000 and P's net capital gain of $3,000. The consolidated
return apportionment factor is 35 percent. On the 2023 consolidated return,
only $350 of B's $3,000 net capital loss carryover can be deducted (the lesser
of $1,000 x .35 or $4,000 x .35).
Notes
Or. Admin. Code §
150-317-0060
RD 10-1986,
f. & cert. ef. 12-31-86; RD 15-1987, f. 12-10-87, cert. ef. 12-31-87; RD
11-1988, f. 12-19-88, cert. ef. 12-31-88; RD 12-1990, f. 12-20-90, cert. ef.
12-31-90; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; REV 6-2004, f. 7-30-04,
cert. ef. 7-31-04; REV 8-2010, f. 7-23-10, cert. ef. 7-31-10; Renumbered from
150-317.013,
REV
67-2016, f. 8-15-16, cert. ef.
9/1/2016;
REV
29-2022, amend filed 12/20/2022, effective
1/1/2023
To view attachments referenced in rule text, click here for
PDF copy.
Publications: Contact the Oregon Department of Revenue for
information about how to obtain a copy of the publication referred to or
incorporated by reference in this rule pursuant to ORS
183.360(2) and
ORS 183.355(2)(b).
To view attachments referenced in rule text,
click here to view
rule.
Statutory/Other Authority: ORS
305.100
Statutes/Other Implemented: ORS
317.010 &
317.476
