NOL - Quick Education

[Oh Baby!]

Although I have been doing taxes for 13 years, I've never had the distinct privilege of working with an NOL and so I need a quick education.

Client has NOL's for 2008 and 2007. I want to carry those losses back to 2006. Unfortunately, TP is getting hit with AMT when I throw in the NOL (carried back from 2008 and 2007)and actually owes more money because of the NOL. So I'd rather use the NOL in 2005, when the TP has real benefit. Is that allowed or do I first have to apply the NOL to 2006 and then use the remainder on 2005?

[Lion EA]

You carry it back to the oldest year appropriate for your default or your election and then carry it forward from that point if it hasn't been used up yet.

[jainen]

>>TP is getting hit with AMT when I throw in the NOL<<

I'm always uncomfortable about the term, "hit with AMT." AMT is a normal part of the system, somewhat more predictable than regular tax. And you shouldn't "throw in the NOL." That is something for which you have a number of planning options. Remember to calculate and apply the AMT NOL separately, for both the current and carryback years. It's a lot of work.

[Oh Baby!]

Sorry. I meant to say "screwed by the AMT".

>>TP is getting hit with AMT when I throw in the NOL<<

I'm always uncomfortable about the term, "hit with AMT." AMT is a normal part of the system, somewhat more predictable than regular tax. And you shouldn't "throw in the NOL." That is something for which you have a number of planning options. Remember to calculate and apply the AMT NOL separately, for both the current and carryback years. It's a lot of work.

[jainen]

>>I meant to say<<

What I meant was that relying on tax benefits makes a poor business model. I'm sorry he has to go back five years to find any decent numbers, but the whole world is pretty much like that these days. I think the idea of the carryback is that the big losses we are seeing now can in a sense be blamed on what was going on three to five years ago. I do admit to some political bias in my economic analysis.

[Gail in Virginia]

>>I meant to say<<

I do admit to some political bias in my economic analysis.

Most people, myself included, have some political or emotional bias in their economic and other analysis. At least you are wiling to own up to it.

[SFBOB]

If you have not printed the instructions on form 1045, go ahead. Pour yourself a large drink of your choice and go to it. This will be a good learning experience for you. Good Luck Bob

[michaelmars]

the problem for me is i do so few of these that i have to re-study the instructions each time!