NOL 5 yr

[Snaggletoof]

If I understand it, if a small business elects to carryback an NOL to the 5th preceding year, they are only allowed to carry back half of their NOL, and then the remainder back to the 4th preceding year.

Assuming the 4th and 5th year were both profitable, far in excess of the surtax exemption, then this "splitting" allows the company to apply ALL of the NOL to the highest rates.

Year 5: $550,000 profit
Year 4 $550,000 profit

NOL carryback $540,000 loss.

This would mean $270,000 is applied against yr 5 at the maximum tax rate, and $270,000 against yr 4, also at the maximum tax rate. Had the entirety of the $540000 NOL been applied to yr 5, then some of the NOL would recover rates as low as 15%.

Someone tell me if I am wrong, and elaborate if I have misunderstood something.

[ChEAr$]

Take a look at the TTB update of 12/07/2009. Looks to me that the 50% applies to the taxable income
of the year to which your 540,000 is carried, and not to the NOL itself.

[WhiteOleander]

Take a look at the TTB update of 12/07/2009. Looks to me that the 50% applies to the taxable income
of the year to which your 540,000 is carried, and not to the NOL itself.

That's my understanding also.