“After the statutory net operating loss for a taxable year has been determined, the amount of the NOL deduction for that year is calculated based on the amount of the statutory loss and any carrybacks and carryforwards of losses from other years. A loss may be carried only to certain years and must be carried to them in a specified order.
An NOL generally can be carried back to each of the two taxable years preceding the loss year (Code Section 172(b)(1)(A)(i)) and carried forward to each of the 20 taxable years following the loss year. Code Section 172(b)(1)(A)(ii). However, small businesses can elect to carry back any NOL for 2008 back three, four, or five years. See Section 48.3(b)(1). Similarly, any NOL for any taxable year ending during 2001 or 2002 may be carried back to each of the five taxable years preceding the loss year, although the taxpayer can elect not to have this provision apply. NOLs arising in taxable years beginning before August 6, 1997 generally could be carried back three years and carried forward 15 years. (Reg. Section 1.172-4(a)(1)(ii); Young v. United States, 103 F. Supp. 12 (W.D. Ark. 1952), aff'd, 203 F.2d 686 (8th Cir. 1953).)”
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Our author, Gary S. Wolfe, has more than 34 years of experience, specializing in IRS Tax Audits and International Tax Planning/Tax Compliance, and International Asset Protection.