Carryback Choice

[Snaggletoof]

Wouri Corporation, a C Corp has a $400,000 loss for 2010. According to new carryback rules, Wouri can choose to carry back this loss to any of the years 2005-2009 (Please don't let me assume this if it is not true).

Taxable profits for those years, and assume nothing out of the ordinary for graduated rates.

2005 $650,000
2006 $600,000
2007 $800,000
2008 $450,000
2009 $150,000

Wouri expects to ride out the recession and lose another $200,000 in 2011.

Which, if any, of the following is true?
a. Wouri can apply $400,000 loss to 2005, and then another $200,000 for the 2011 loss, but only also to 2005.
b. Wouri can apply $400,000 loss to 2005, but since 2005 is no longer in the 5-year window for 2011, the $200,000 loss in 2011 must be applied to 2006.
c. Wouri can apply $400,000 loss to 2005, but since 2005 is no longer in the 5-year window for 2011, Wouri gets a new choice and can roll back their 2011 loss to any other year of their choice so long as it is in the window.

[Corduroy Frog]

Any Takers

Any takers on this one? I have a "hypothetical client" with a situation similar to this.

The implications are significant as essentially it boils down to whether you are forced to exhaust the lowest rate levels or not.

[BHoffman]

Here's a link to a Q&A from irs.gov regarding NOL carryback: You probably already read this, but I'm giving you a bump anyway.

http://www.irs.gov/newsroom/article/0,,id=217370,00.html

[Davc]

Has that been extended for 2010 NOLs? With different rules than for 2008 and 2009?

[Snaggletooth]

Different Complexion

The original post is rapidly losing its validity, after reading this material.

Firstly, Davc raises a good point. There is no mention that a tax year beginning in 2010 qualifies for the 5-year carryback.

Secondly, Beth's reference material says that if the client elects a 5-year carryback, only 50% of the carryback is allowed against that 5th year. The material does not state whether the remaining 50% of NOL is eligible to carryback against the 4th year.

Geez...

[JON]

Info is correct

I do not think anything so far is going to apply to NOLs for years beginning in 2010, unless it is included in the "small business act" that has not passed, yet. You are limited to 50% in year 5 only and the balance can be used up in years 4, 3, 2, and 1.