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NOL Carryback Never Ends ?

Technical topics regarding tax preparation.
#1
Goodday  
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Large '17 NOL carried back to wipes out taxable SS benefits on '15 and takes taxable income below zero. (Individual)
Large NOL remaining to carry to '16. Seems odd, but after applying the carryback, the tax program (L) presents a small amount of additional NOL created for 2015. It is labeled the 2015 "current year NOL".
If correct, what would one do with this "additional" NOL? Would it be added to the amount carried forward to '16 or does it perpetuate itself to a potential never ending cycle of carrybacks (from '15 to '13, then if add'l created in '13 to '11 and on & on)? Thanks.
 

#2
Doug M  
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the tax program (L) presents a small amount of additional NOL created for 2015


An NOL is created on an original tax return. I can't think of any scenario creating an NOL from an NOL c/b.

If Lacerte is software, :? prepare Schedules A and B in the 1045 series. You cannot use form 1045, but the schedules are very comprehensive. Schedule A computes the NOL. Schedule B computes the amount absorbed in the carryback year.
 

#3
dave829  
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Doug M wrote:I can't think of any scenario creating an NOL from an NOL c/b.

Maybe that’s because of the language of section 172(b)(2)(B):

(2) Amount of carrybacks and carryovers.—The entire amount of the net operating loss for any taxable year (hereinafter in this section referred to as the “loss year”) shall be carried to the earliest of the taxable years to which (by reason of paragraph (1)) such loss may be carried. The portion of such loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sentence, the taxable income for any such prior taxable year shall—

    (A) be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,
    (B) not be considered to be less than zero, and
    (C) not exceed the amount determined under subsection (a)(2) for such prior taxable year.
 

#4
Chay  
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Based on that statute, it sounds to me like you first look at the taxable income for a given year, then carry that amount of loss back to the given year, skipping any years where the taxable income is not more than zero. You would then subtract the same "taxable income" figure from the overall NOL before carrying that NOL forward.

Section 172(d)(1) provides that the effects of the NOL deduction itself are not taken into account when computing "taxable income". So, the amount of the NOL deduction is fixed before it ever lands on the return. After it arrives, there may be some AGI side effects such as the section 469 exception for small landlords and the computation of taxable Social Security. Could anything like this give rise to an NOL for the year in question?
 

#5
dave829  
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Chay wrote:Could anything like this give rise to an NOL for the year in question?

I don’t think so. 172(b)(2)(A) is saying that after carrying back the NOL from the loss year to a carryback year, you must make certain modifications to the taxable income of the carryback year, such as recompute the taxable portion of social security benefits. But 172(b)(2)(B) is saying that after making those modifications, taxable income of the carryback year can’t be less than zero. This is consistent with Form 1045, Schedule B. line 9, which states, “Modified taxable income. Combine lines 2 through 8. If zero or less, enter -0-“
 

#6
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Lacerte's computation of Sch B's Modified Taxable Income and the carryforward is inconsistent with Form 1045's instructions.
The treatment of the social security benefits is the issue.
 

#7
Doug M  
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You must be on Schedule B. If you have an entry on line 3 or 4, you must refigure your taxable SS benefits per instructions.
 


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