Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 70-74

1970-1 C.B. 50

IRS Headnote

Net operating losses of a corporation are not affected by a reduction in its capitalization approved by State authorities; I.T. 1935 superseded.

Full Text

Rev. Rul. 70-74 /1/

A corporation has paid-in capital of 50x dollars. Each year since its incorporation it has sustained losses and has a net deficit of 10x dollars. In the current taxable year, with the approval of the appropriate state official, it reduced its capitalization from 50x dollars to 40x dollars which amount represented the actual value of the stock.

Held, the net operating losses of the corporation determined in accordance with section 172 of the Internal Revenue Code of 1954 are not affected by the reduction in the capital of the corporation.

I.T. 1935, C.B. III-1, 65 (1924), is superseded since the position stated therein is restated under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.