Net Operating Loss (NOL) Carryback Act

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Article summary (how summaries work)
Extends 5 year carryback to 2009 losses

10/02/09 - Delay in passing (or not) of this bill has material affect on tax planning as it relates to the decision of which year(s) to carryback a 2008 NOL.  The decision on the 2008 NOL carryback must be made by the October 15, 2009 extended due date for the 2008 individual return and is irrevocable (under current law).  A real life example of a small businessman: election of a 5 year carryback to 2003 of the 2008 NOL results in a refund of about $8,500.  Election of a 4 year carryback to 2004 of the 2008 NOL results in a refund of about $14,500.  Losses are anticipated for the 2009 tax year.  If it is known at this time that a 5 year carryback will be available for the 2009 NOL, the optimal planning would be to carryback the 2008 NOL to 2003 and the 2009 NOL to 2004.  If the 2008 NOL is carried back to 2003 and HR 2452 does not pass, leaving the businessman with a 2 year carryback option of the 2009 NOL, the 2004 refund is forever lost.  Solution:  provision should be added to HR 2452 to allow for a window of time to modify the (irrevocable) election made regarding the 2008 NOL carryback to let taxpayers obtain the maximum benefit from the 2008 and 2009 loss carrybacks.