taxbrewster Posted June 17, 2009 Report Posted June 17, 2009 Question for the great forum. I have read some old posts as well as some IRS pubs. Here is the situation. 2 younger clients bought a restaurant, first year of business, have a huge loss on the 1120-S, the loss carries over to their 1040, thus creating a negative agi. They have small w2 for the 1120, nothing else. From what I have read, it makes no sense for them to go carryback the loss because of low agi from the previous years. So do I forgo the carryback of net operating loss (election on this yrs return) and then be able to carry forward the loss in future years to offset future income (is there another election, I need to make)? What is the play here, I have little experience with NOL...I need some help. Thanks. Quote
joelgilb Posted June 17, 2009 Report Posted June 17, 2009 Sounds like the election to forgo the carryback is appropriate, but you should check to see what if any refunds they would get by carrying the loss back. If income was small in prior years and they paid little or no taxes then it your professional opinion what to suggest to the client. But, ultimately it should be their decision with you providing the professional advice. It is after all their return. That said; to carry the loss forward you need only make the election, which can easily be done using the Election Form ATX has provided. Next year you will have to make sure you correctly calculate the NOL carryforward amount. Quote
Maribeth Posted June 17, 2009 Report Posted June 17, 2009 IF you can, before making the election to carryforward, determine what, if anything, would be the effect of carrying the NOL back. If there is no tax effect, then don't make the election to carryforward. That way, if there is unreported income in those prior years, you still retain the option of carrying the NOl back. Maribeth Quote
taxbrewster Posted June 17, 2009 Author Report Posted June 17, 2009 Thanks for the comments. So are you stating, if I determine there is no reason (tax wise) to carry back, I do not need to make an election on 2008 to carry forward, correct? I just file as is.... Quote
taxbrewster Posted June 17, 2009 Author Report Posted June 17, 2009 Do I need to do something special in ATX to make sure it rolls over to 2009? Quote
TAXBILLY Posted June 17, 2009 Report Posted June 17, 2009 There is nothing to roll over if you are not making the election. taxbilly Quote
GeneInAlabama Posted June 17, 2009 Report Posted June 17, 2009 If you want to carry it forward, you have to make the election to carry it forward. Quote
Maribeth Posted June 17, 2009 Report Posted June 17, 2009 Thanks for the comments. So are you stating, if I determine there is no reason (tax wise) to carry back, I do not need to make an election on 2008 to carry forward, correct? I just file as is.... That is correct. If there is no tax effect in prior years, then you have actually carried it back for those years, used none of it, and now you will carry it forward. As to how ATX will handle the carryforward, you will have to make sure that it is entered on the 2009 tax return. In addition, you will have to calculate the NOL used in 2009. If it is not all used up, then you will have to make the intervening year calculation in order to determine how much gets carried forward to 2010. ATX does not make that calculation for you. Maribeth Quote
TAXBILLY Posted June 17, 2009 Report Posted June 17, 2009 Points to ponder: http://www.irs.gov/newsroom/article/0,,id=205331,00.html taxbilly Quote
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