Dreaded NOL Question

[rkhan71]

Hello all,

If any one feels like answering. This is a little involved. I have a slight bit of the flu effects that is going around so need a "second" opinion based on the circumstances for filing of a 2009 return. NOL created in 2008 filing. This is an S corp, K-1 passthrough loss circumstance with basis (at-risk money), etc. I have not investigated the carryback part, as this return was not timely filed; it was filed in 2014. So presumably carry forward only option - or am I missing something? Additionally, the shareholder employee did not take salary due to the poor financial condition of the business; he used income sources from savings etc., to pay for his mortgage, etc. So the NOL that carried over from 2008 is affecting 2009 figures, if I allow it of course. I have not passed through the loss from 2009 S corp yet. Basically this taxpayer is swimming in losses because of the loss circumstances in 2008 - 2011 (2010 - 2011 to be filed), etc. He still has basis as of 2009.

So, my real question is regardless of the income, loss or whatever derived in the income portion of his 1040, the NOL has to be used up against income (to income level). However, there is only a very small amount of dividends and interest - very small. I am a little confused as to how much NOL to use in 2009 personal return, since the NOL is a much larger amount than the passive income derived. This is just a circular motion - no income - previous NOL wastes away due to no income. We cannot pick and choose whether to deduct an NOL. Or just deduct the small amount of passive income (NOL portion) and carryover rest of NOL?

Any thoughts please; sorry if confusing. I just want to get the gist of whether taking NOL on no income sources has any room to wiggle or...?

Thanks.

[Lion]

You cannot waive the carryback unless on a timely filed return. So, you have to carry back. Use what gets used. You don't get to pick how much. Then keep moving it forward until it's used up. Your NOL year of 2008 is a closed year, so you won't get any possible additional refund unless it goes back and then comes forward all the way to 2012 and later that are still open. Try Pub 536 for NOL information.

[ATSMAN]

Excellent point. I was trying to figure out what is going on but I think the crux is delinquent tax returns.

2008 - 2011 (2010 - 2011 to be filed)

2008, 2009, 2010 are all closed years now so in effect the only way it may benefit is if a NOL still remains in 2011!

As you may already know a S corp or Partnership does not have NOL on the entity return it is reflected in the K1 that the shareholder/partner uses.

[rkhan71]

Thanks, guys

Based on your thought and I am in agreement; this is not a timely return, so have to carry back to 2006, then 2007, and so on. Actually, I am filing S Corp returns for 2008 - 2013. I believe there are losses due to the state of the economy at that time. But my main concern in posing this question was there is no real income except for small amount of passive, and a lot of NOL for 2008. Presumably, this NOL just gets wasted as part of the equation due to this circumstance, I believe. It is what it is.

So I will see what happens through 2013 for NOL purposes. I wish there was a more definitive guide and examples on the nuances of NOL's. Sometime there is more assumption in making decisions than are correct.

Thanks for your thoughts folks.