Question On Nol Carryback

[GTS1101]

I have a client who is self-employed. For 2005 he has a NOL loss of approx 50,000 that I will carry back to 2003. If I reduce his income in 2003 by the NOL carryback it will have no effect on his tax return other than taking his AGI down to zero and have about 13,000 carryforward to future years. He has no regular tax liablity so it has no effect. The only tax he pays is the self employment tax. My question is since it will have no effect on 2003 in that he won't get any additional money back as a result of the NOL do I still carry to 2003 and does he basically lose that loss of 37,000 absorbed in 03 but no effect on the return or can it be carryforwarded to a future year where he will get money back?

Thanks!

GTS1101

[Bill Tubbs]

elect to carryforward?

If the return is on extension, then you can elect to forgo the carry back and just carry it forward -- then perhaps he'll be able to use the NOL to his benefit in a future year since he apparently doesn't benefit from carrying it back.

Note:you said he loses 37,000 in 2003 -- does the remaining 13,000 help in in 2004? If it doesn't help at all in either year, the decision to forgo the carryback is a no-brainer. If it does benefit his 2004 result, then you have to estimate what the savings then is, vs. what possible savings he would enjoy in the years to come.

Bill