172 Net Operating Losses NOLs

1
172Net Operating Losses (NOLs)

• Annual Tax Determinations
• Cyclical Business Patterns

2
NOLs C/B C/O

• Carryback (C/B) 2 years
• 2nd preceding year
• 1st preceding year
• Carryover (C/O) or Carry forward (C/F) 20 years
• 1st succeeding year
• 2nd succeeding year
• Etc., Etc.
• 3 year c/b retained for certain thefts and small
  businesses and farming

3
NOLs C/B C/O (cont.)

• Sequence of years is mandatory
• In the year of the loss, the taxpayer may
  irrevocably elect to forego the C/B
• The C/B is an amendment of the prior years
  previously filed tax return.

4
Losses allowed NOL treatment

• Business Losses
• Theft, casualty losses
• Foreign expropriation losses

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Calculating NOL - Directly

• Start w/ loss for which NOL is allowed
• Other business income
• Nonbusiness Income in excess of Nonbusiness
  Deductions
• NOL, i.e., economic loss from business

6
Required NOL Calculation

• Start with TAXABLE INCOME
• Accountants like to reconcile
• Take out of Taxable Income those items not
  allowed!
• Capital Gains/Losses are subject to their own set
  of adjustments