Particulars on NOL carryover

[rfk]

If a client has an NOL - Schedule E and sale of business property which created an NOL for TY 2009, I am helping the client to forgo carrying back. But what is going to restrict his use of the carry forward for the coming years? Does he always have to have a business related situation? Can he apply an NOL to regular W-2, interest and dividend, etc. type items?

Just need clarification for how the carry forward loss is applied to income in the future. It seems like little chunks of NOL could be used on line 21 to reduce AGI, I presume, or not?

Thanks for your help.

rfk

[Maribeth]

Are you doing your client a disservice by electing to carryforward the NOL. Have you looked at the tax benefit of carrying the NOL back??

Maribeth

[rfk]

Has no...

benefit going back so want to carry it forward to offset any future taxable situation(s) to get refunds where applicable. But want to be sure that it can be applied to all taxable situations, and not just business income, rentals, or the like situation. Even if standard W-2 income only.

Thanks, Maribeth.

rfk

[Maribeth]

An NOL carryforward in a subsequent year is considered to be "just" a deduction. It will offset any type of income, W-2, rental, retirement, etc., and will be used up only as income provides. For example, if your client has a loss in 2010, before the deduction of any NOL carryforward, then NO NOL will be used in the 2010 and the entire balance will carryforward to 2011.

Maribeth

[Maribeth]

One more thing . . . . . if you have already determined that none of the NOL would be used in a carryback, then do NOT elect to carry it forward. Since none of it would be used, there is no need to elect to carryforward. This can protect your client in future years, if past years are audited and income is discovered, then any NOL can be carried back to those years.

Maribeth

[rfk]

Thank you, Maribeth

for the idea to forgo the past years. You are right in that if an audit occurs and monies are due, we can go back too. But as you said, I will make no election to do so either way but wait until the appropriate situation occurs down the line. Hope this is what you are saying - late in the day.

rfk.

[BOB W]

If no election is made, then it is a carryback election. Carrybacks can only go so far and then it is lost...

[rfk]

Bob...

I am mostly looking to this to aide my client from the perspective of future years because he may be in a situation where he needs the NOL. Going back may be an issue but statistically, going forward may be more of an issue.

rfk

[BOB W]

I am mostly looking to this to aide my client from the perspective of future years because he may be in a situation where he needs the NOL. Going back may be an issue but statistically, going forward may be more of an issue.

rfk

I agree, go forward...............

[taxjungle]

Carryforward NOL

I believe in order to carryforward an NOL there has to be an Election to do so, otherwise witlhout the Election you have to carry the NOL back.

You elect to carryforward by making an Election to NOT carryback the NOL by attaching a statement to the return: "The taxpayer hereby elects under Section 172(b)(3) of the IRC to waive the NOL carryback period."