Without Waiver of Net Operating Loss (NOL) Carryback, No Carryforward Deduction

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Without Waiver of Net Operating Loss (NOL) Carryback, No Carryforward Deduction

Posted by Kim Chen on September 25th, 2016

NOLs must first be carried back for two years, with the remainder carried forward for up to 20 years. However, an election can be made to waive the carryback and carry the entire loss forward. In this case, the taxpayer claimed deductions for NOL carryovers stemming from his ownership in S corporation video store liquidation business. However, he never filed the proper election to waive the NOL carryback period. The IRS sent a notice of deficiency, finding that the NOL deductions were improperly claimed. The Eleventh Circuit Court of Appeals, agreeing with the Tax Court’s earlier decision, concluded that, without the election to relinquish the carryback, the NOL carryforward deductions were disallowed. Accuracy penalties were assessed. Mark D. Jasperson, 118 AFTR 2d 2016-XXXX (CA 11), aff’g TC Memo 2015-186.