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Posted by nish on September 2, 2008, 1:58 am
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On the Federal 1040x, when carrying back a loss to a year that had a gain,
should the objective be to take back just the portion of the loss that
exactly covers the gain, and not one dollar more? Or are you required to
take back the entire loss or none of it at all?
I have an old return where the accountant apparently took back much more
than what was required to cover the gain. That has the unfortunate side
effect of moving back by two years the time period during which you can
later take the residual loss carryforward?
To use a specific example, let's say the year 1998 1040 return shows a $40K
gain. In year 2000 you have a $50K loss. If you carry back $50K to 1998
by filing 1040x in 2000, and that wipes out the $40K gain in 1998. But you
also move back by two years the time period during which you can take the
residual $10K loss, moving forward?
nish
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Posted by Harlan Lunsford on September 2, 2008, 3:41 pm
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nish wrote:
> On the Federal 1040x, when carrying back a loss to a year that had a gain,
> should the objective be to take back just the portion of the loss that
> exactly covers the gain, and not one dollar more? Or are you required to
> take back the entire loss or none of it at all?
>
> I have an old return where the accountant apparently took back much more
> than what was required to cover the gain. That has the unfortunate side
> effect of moving back by two years the time period during which you can
> later take the residual loss carryforward?
>
> To use a specific example, let's say the year 1998 1040 return shows a $40K
> gain. In year 2000 you have a $50K loss. If you carry back $50K to 1998
> by filing 1040x in 2000, and that wipes out the $40K gain in 1998. But you
> also move back by two years the time period during which you can take the
> residual $10K loss, moving forward?
>
> nish
>
Well now, in this case, the extra 10k would simply carry over to year
1999 where it's used, or not, and if not, carries forward to 2000, etc etc.
ChEAr$,
Harlan Lunsford, EA n LA
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by nish on September 2, 2008, 9:58 pm
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> nish wrote:
>> On the Federal 1040x, when carrying back a loss to a year that had a
>> gain, should the objective be to take back just the portion of the loss
>> that exactly covers the gain, and not one dollar more? Or are you
>> required to take back the entire loss or none of it at all?
>>
>> I have an old return where the accountant apparently took back much more
>> than what was required to cover the gain. That has the unfortunate side
>> effect of moving back by two years the time period during which you can
>> later take the residual loss carryforward?
>>
>> To use a specific example, let's say the year 1998 1040 return shows a
>> $40K gain. In year 2000 you have a $50K loss. If you carry back $50K
>> to 1998 by filing 1040x in 2000, and that wipes out the $40K gain in
>> 1998. But you also move back by two years the time period during which
>> you can take the residual $10K loss, moving forward?
>>
>> nish
>>
> Well now, in this case, the extra 10k would simply carry over to year 1999
> where it's used, or not, and if not, carries forward to 2000, etc etc.
But in the end do you get two fewer years to carry forward the loss?
And are you required to take backward the entire loss, not just part of the
loss?
nish
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by removeps-groups@yahoo.com on September 3, 2008, 11:06 pm
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> And are you required to take backward the entire loss, not just part of the
> loss?
If you are doing a carryback, you have to carryback the entire NOL,
and only if there is any amount leftover does this remaining NOL go
into the next year's return. In other words, you can't elect how much
of the NOL to deduct. However, you can elect to not take any
carrback, but just the carryforwards.
If you are doing a carryforward, you have to carryforward the entire
NOL. There is no election to do a carryback.
<Quote source="http://www4.law.cornell.edu/uscode/uscode26/
usc_sec_26_00000172----000-.html">
(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 be computed—
(A) with the modifications specified in subsection (d) other than
paragraphs (1), (4), and (5) thereof, and
(B) 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,
and the taxable income so computed shall not be considered to be less
than zero.
(3) Election to waive carryback
Any taxpayer entitled to a carryback period under paragraph (1) may
elect to relinquish the entire carryback period with respect to a net
operating loss for any taxable year. Such election shall be made in
such manner as may be prescribed by the Secretary, and shall be made
by the due date (including extensions of time) for filing the
taxpayer’s return for the taxable year of the net operating loss for
which the election is to be in effect. Such election, once made for
any taxable year, shall be irrevocable for such taxable year.
</Quote>
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Seth on September 4, 2008, 9:08 am
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>> nish wrote:
>>> On the Federal 1040x, when carrying back a loss to a year that had a
>>> gain, should the objective be to take back just the portion of the loss
>>> that exactly covers the gain, and not one dollar more? Or are you
>>> required to take back the entire loss or none of it at all?
>>> To use a specific example, let's say the year 1998 1040 return shows a
>>> $40K gain. In year 2000 you have a $50K loss. If you carry back $50K
>>> to 1998 by filing 1040x in 2000, and that wipes out the $40K gain in
>>> 1998. But you also move back by two years the time period during which
>>> you can take the residual $10K loss, moving forward?
>> Well now, in this case, the extra 10k would simply carry over to year 1999
>> where it's used, or not, and if not, carries forward to 2000, etc etc.
>
>But in the end do you get two fewer years to carry forward the loss?
What type of loss is it?
If it's a capital loss, you have forever (or at least your lifetime),
so two fewer years doesn't matter.
Seth
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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