Nol

[GTS1101]

I have a client who in 2004 opened up a 99ct store. The store did really bad and he had approx a 37,000 loss. That created an NOL for 2004. Am I correct in that this should be carried back 2 years and then forward 20? Also in 2005 he has a 32,000 loss and will have another NOL for 2005. How do you handle? Do you carryforward 20 since the other NOL was already carried back for 2 years?

Thanks,

GTS!101

[Bill Tubbs]

Sole Proprietorship?

I have a client who in 2004 opened up a 99ct store. The store did really bad and he had approx a 37,000 loss. That created an NOL for 2004. Am I correct in that this should be carried back 2 years and then forward 20?

What structure was the 99cnt store? Was it a Sole Proprietor (or a disregarded LLC)?

If so, sounds like you are on the right track (though I always have to look up how many years back it goes -- can't remember if it's 2, 3, or 5 as I don't have many NOLs). If you're doing the 2004 return now, then you're stuck with carrying back 2 years first -- the election to forgo a carryback is only available on a timely filed return.

Also in 2005 he has a 32,000 loss and will have another NOL for 2005. How do you handle? Do you carryforward 20 since the other NOL was already carried back for 2 years?

If, after the 2004 NOL is carried back to 2002 & 2003, there is still some NOL left, then I would elect to waive the carryback on the 2005 NOL and just carry it forward -- no benefit in 2003 to carrying it back and makes the numbers a little easier. However, if the 2004 NOL was totally used up in 2002 & 2003, then I would review how much benefit carrying the 2005 NOL back to 2003 would yield.

Bill