Common use of Extent of allowable reduction Clause in Contracts

Extent of allowable reduction. The AAA may be decreased under para- graph (a)(3)(i) of this section below zero. The AAA is decreased by noncap- ital, nondeductible expenses under paragraph (a)(3)(i)(C) of this section even though a portion of the noncap- ital, nondeductible expenses is not taken into account by a shareholder under § 1.1367–1(g) (relating to the elec- tive ordering rule). The AAA is also de- creased by the entire amount of any loss or deduction even though a portion of the loss or deduction is not taken into account by a shareholder under section 1366(d)(1) or is otherwise not currently deductible under the Internal Revenue Code. However, in any subse- quent taxable year in which the loss, deduction, or noncapital, nondeduct- ible expense is treated as incurred by the corporation with respect to the shareholder under section 1366(d)(2) or § 1.1367–1(g) (or in which the loss or de- duction is otherwise allowed to the shareholder), no further adjustment is made to the AAA.