The taxpayer at issue (“Taxpayer”) was a corporate subsidiary of MCI, Inc. (“MCI”). For federal income tax purposes, Taxpayer filed as part of the MCI consolidated group. As a result of Chapter 11 bankruptcy proceedings, MCI had cancellation of indebtedness income (“CODI”) of $25 billion. Although MCI was able to exclude that CODI from its federal consolidated income, it was required under I.R.C. § 108(b) to reduce its tax attributes by the same amount. Of the $25 billion of CODI, only $71 million was related to debt owed directly by Taxpayer. But because its upper-tier affiliates’ tax attributes were insufficient to absorb the CODI, the federal consolidated return rules required Taxpayer to reduce its tax attributes by $3.6 billion. For the 2005 tax year, this resulted in Taxpayer having $271 million less depreciation deductions for consolidated federal income tax purposes.