Lehman Brothers Financial SA (LEHNQ)

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Below is the second paragraph that I quoted. Note: "Attribute reduction forces the debtor to trade the current exclusion of income for future tax deductions." In other words, if a debtor excludes COD income, then it must reduce tax attributes, starting with NOL.

Attribute Reduction. If a debtor excludes COD income under either the bankruptcy or insolvency exception, then the attribute reduction rules are triggered. Id. § 108(b). Attribute reduction forces the debtor to trade the current exclusion of income for future tax deductions. The debtor will be required to reduce tax attributes, in the following order:

net operating loss carryovers,
tax credit carryovers,
capital loss carryovers,
tax basis in assets,
passive loss carryovers, and
foreign tax credit carryovers.