Rolling Both Directions

[Snaggletooth]

Ceecorp, Inc., a C-corporation has a large operating loss, and in addition a moderate capital loss on sale of mutual funds.

Any problem in rolling the NOL BACKward, and simultaneously rolling the Capital Loss FORward? In reading the material, I don't see anything that prohibits this.

[ChEAr$]

Ceecorp, Inc., a C-corporation has a large operating loss, and in addition a moderate capital loss on sale of mutual funds.

Any problem in rolling the NOL BACKward, and simultaneously rolling the Capital Loss FORward? In reading the material, I don't see anything that prohibits this.

I sure don't know the answer to this one, but somehow I'm reminded of that old saw "you can't have your cake and eat it too."

[appelman]

It seems to me that that would be the only way to do it.

Unless you elect out of the NOL carryback. You can't hardly carry back a capital loss!

[Snaggletooth]

Clarification

Nothing wrong with the original post, but should probably explain.

C Corp has large loss and can optimize their refund if carried back to the 4th year, which had substantial profit.

However, during none of those years did the C Corp invest in any capital assets. In 2007, temporarily awash with cash, decided to put a substantial hunk of money into mutual funds. I don't have to tell you what happened then.

For the year just ended, it became necessary to liquidate these funds, and capital losses were created. However, there were never any capital gains in prior years to accommodate a rollback.

We wish to roll BACK the NOL, and roll FORWARD the capital loss. This seems like quartering with horses, but I don't read anywhere why this can't be done. But lotsa people are more experienced with this stuff and smarter than me to begin with.

[Maribeth]

Nothing wrong with the original post, but should probably explain.

C Corp has large loss and can optimize their refund if carried back to the 4th year, which had substantial profit.

However, during none of those years did the C Corp invest in any capital assets. In 2007, temporarily awash with cash, decided to put a substantial hunk of money into mutual funds. I don't have to tell you what happened then.

For the year just ended, it became necessary to liquidate these funds, and capital losses were created. However, there were never any capital gains in prior years to accommodate a rollback.

We wish to roll BACK the NOL, and roll FORWARD the capital loss. This seems like quartering with horses, but I don't read anywhere why this can't be done. But lotsa people are more experienced with this stuff and smarter than me to begin with.

Capital losses in a corporation can only be used to offset capital gains. The carryback period is 3 years and the carryforward period is 5 years. If the capital losses were sustained in tax year 2007, then the carryback period is 2006, 2005 and 2004. Since you have no capital gains in those years, then there is nothing to carryback. You therefore carryforward your capital losses to 2008, 2009, 2010, 2011 and 2012.

Your capital losses are separate from your NOL. You have apples & oranges.

Maribeth

[Bees Knees]

I don't think you have the option to carry a capital loss forward without first trying to carry it back in a C corp. Of course, as already stated, if there are no capital gains in the carryback years, then it must be carried forward for up to 5 years.

[appelman]

Maribeth is absolutely right.

I'd forgotten about the capital loss carryback option for C Corps. As I read it, it really is an option, not a requirement. But in this case it doesn't look like it makes any difference. Also, I believe all capital losses carried back or forward become short-term.

The key point is, as Maribeth notes, that capital losses and NOL's are treated entirely independently.

[appelman]

Correction

I guess Bees Knees is right, too. The instructions do say "is carried back," not "may be carried back." Maybe I need to engage brain before putting mouth in gear! But, again, fortunately, in this case it doesn't matter.