Thursday, January 20, 2011

Section 172 Net Operating Loss NOLS

The LOSS CARRYOVER PROVISION of §172, which permit a tax payer with a “net operating loss” in one tax year to use the NOL to offset positive income in the other years. An NOL may be used to offset net income in the two years proceeding the loss year, and in the 20 years following the loss year.

NOLs are deductions from gross income, Long range HORIZONTAL EQUITY

Two year limitation on carrybacks, income AFTER the taxable period
Carryover- maximum of 20 years, income BEFORE the taxable event.

§ 172(d) disallows personal exemptions in calculating NOLS, no negative income for personal exemptions. ONLY BUSINESS LOSSES, NO PERSONAL LOSSES

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