Looking for a Irs Publications? Download it for free!

losses without regard to the special 5-year car-

return on time, you can make this choice on an

When To Use an NOL

ryback rule. If you filed your return on time, you

amended return filed within 6 months after the

can make this choice on an amended return filed

due date of the return (excluding extensions).

within 6 months after the due date of the return

Attach a statement to your amended return, and

Generally, if you have an NOL for a tax year

(excluding extensions). Attach a statement to

write “Filed pursuant to section 301.9100-2” at

ending in 2010, you must carry back the entire

your amended return, and write “Filed pursuant

the top of the statement. Once made, this choice

amount of the NOL to the 2 tax years before the

to section 301.9100-2” at the top of the state-

is irrevocable.

NOL year (the carryback period), and then carry

ment. Once made, this choice is irrevocable.

forward any remaining NOL for up to 20 years

Qualified GO Zone loss. The carryback pe-

after the NOL year (the carryforward period).

riod for a qualified GO Zone loss is 5 years. Only

Qualified disaster loss. The carryback pe-

You can, however, choose not to carry back an

the qualified GO Zone loss portion of the NOL

riod for a qualified disaster loss is 5 years. Only

NOL and only carry it forward. See

Waiving the

can be carried back 5 years. A qualified GO

the qualified disaster loss portion of the NOL can

Carryback

Period, later. You cannot deduct any

Zone loss is the smaller of:

be carried back 5 years. A qualified disaster loss

part of the NOL remaining after the 20-year

is the smaller of:

carryforward period.

1. The excess of the NOL for the year over

the specified liability loss for the year to

1. The sum of:

NOL year. This is the year in which the NOL

which a 10-year carryback applies, or

occurred.

a. Any losses attributable to a federally

2. The total of any qualified GO Zone casu-

declared disaster and occurring in the

alty loss and any depreciation allowable for

Exceptions to 2-Year

disaster area, plus

any specified GO Zone extension nonresi-

Carryback Rule

dential real property and residential rental

b. Any allowable qualified disaster ex-

property placed in service in 2010 (even if

penses (even if you did not choose to

Eligible losses, farming losses, qualified disas-

you elected not to claim the special GO

treat those expenses as deductions in

ter losses, qualified GO Zone losses, and speci-

Zone depreciation allowance for such

the current year), or

fied liability losses, defined next, qualify for

property).

longer carryback periods.

2. The NOL for the tax year.

For a list of counties and parishes included in

Eligible loss. The carryback period for eligible

the GO Zone, see Notice 2007-36, 2007-17

Qualified disaster expenses. A qualified

losses is 3 years. Only the eligible loss portion of

I.R.B. 1000, available at

disaster expense is any capital expense paid or

the NOL can be carried back 3 years. An eligible

2007-17_IRB/ar12.html.

incurred in connection with a trade or business

loss is any part of an NOL that:

Waiving the 5-year carryback. You can

or with business-related property which is:

•

Is from a casualty or theft, or

choose to figure the carryback period for a quali-

•

For the abatement or control of hazardous

fied GO Zone loss without regard to the special

•

Is attributable to a federally declared dis-

substances that were released as a result

5-year carryback rule. To make this choice for

aster for a qualified small business or cer-

of a federally declared disaster,

2010, attach to your 2010 income tax return filed

tain qualified farming businesses.

by the due date (including extensions) a state-

•

For the removal of debris from, or the

ment that you are choosing to treat any 2010

demolition of structures on, real property

Qualified small business. A qualified small

qualified GO Zone losses without regard to the

which is business-related property dam-

business is a sole proprietorship or a partner-

special 5-year carryback rule. If you filed your

aged or destroyed as a result of a feder-

ship that has average annual gross receipts

original return on time, you can make this choice

ally declared disaster, or

(reduced by returns and allowances) of $5 mil-

on an amended return filed within 6 months after

lion or less during the 3-year period ending with

•

For the repair of business-related property

the due date of the return (excluding exten-

the tax year of the NOL. If the business did not

damaged as a result of a federally de-

sions). Attach a statement to your amended

exist for this entire 3-year period, use the period

clared disaster.

return, and write “Filed pursuant to section

the business was in existence.

301.9100-2” at the top of the statement. Once

Business-related property is property held for

An eligible loss does not include a farming

made, this choice is irrevocable.

use in a trade or business, property held for the

loss, a qualified disaster loss, or a qualified GO

Zone loss.

production of income, or inventory property.

Specified liability loss. The carryback period

for a specified liability loss is 10 years. Only the

Farming loss. The carryback period for a

specified liability loss portion of the NOL can be

Note. Internal Revenue Code section 198A

farming loss is 5 years. Only the farming loss

carried back 10 years. Generally, a specified

allows taxpayers to treat certain capital ex-

portion of the NOL can be carried back 5 years.

liability loss is a loss arising from:

penses (qualified disaster expenses) as deduc-

A farming loss is the smaller of:

•

tions in the year the expenses were paid or

Product liability, or

incurred.

1. The amount that would be the NOL for the

•

An act (or failure to act) that occurred at

tax year if only income and deductions at-

Excluded losses. A qualified disaster loss

least 3 years before the beginning of the

tributable to farming businesses were

does not include any losses from property used

loss year and resulted in a liability under a

taken into account, or

in connection with any private or commercial

federal or state law requiring:

2. The NOL for the tax year.

golf course, country club, massage parlor, hot

tub facility, suntan facility, or any store for which

1. Reclamation of land,

the principal business is the sale of alcoholic

Farming business. A farming business is a

2. Dismantling of a drilling platform,

beverages for consumption off premises.

trade or business involving cultivation of land,

raising or harvesting of any agricultural or horti-

A qualified disaster loss also does not in-

3. Remediation of environmental contamina-

cultural commodity, operating a nursery or sod

clude any losses from any gambling or animal

tion, or

farm, raising or harvesting of trees bearing fruit,

racing property. Gambling or animal racing

4. Payment under any workers compensation

nuts, or other crops, or ornamental trees. The

property is any equipment, furniture, software,

act.

raising, shearing, feeding, caring for, training,

or other property used directly in connection with

and management of animals is also considered

gambling, the racing of animals, or the on-site

a farming business.

viewing of such racing, and the portion of any

Any loss from a liability arising from (1)

A farming business does not include contract

real property (determined by square footage)

through (4) above can be taken into account as

harvesting of an agricultural or horticultural com-

that is dedicated to gambling, the racing of ani-

a specified liability loss only if you used an ac-

modity grown or raised by someone else. It also

mals, or the on-site viewing of such racing, un-

crual method of accounting throughout the pe-

does not include a business in which you merely

less this portion is less than 100 square feet.

riod in which the act (or failure to act) occurred.

buy or sell plants or animals grown or raised by

For details, see section 172(f) of the Internal

Waiving the 5-year carryback. You can

someone else.

Revenue Code.

choose to figure the carryback period for a quali-

Waiving the 5-year carryback. You can

fied disaster loss without regard to the special

Waiving the 10-year carryback. You can

choose to figure the carryback period for a farm-

5-year carryback rule. To make this choice for

choose to figure the carryback period for a spec-

ing loss without regard to the special 5-year

2010, attach to your 2010 income tax return filed

ified liability loss without regard to the special

carryback rule. To make this choice for 2010,

by the due date (including extensions) a state-

10-year carryback rule. To make this choice for

attach to your 2010 income tax return filed by the

ment that you are choosing to treat any 2010

2010, attach to your 2010 income tax return filed

due date (including extensions) a statement that

qualified disaster losses without regard to the

by the due date (including extensions) a state-

you are choosing to treat any 2010 farming

special 5-year carryback rule. If you filed your

ment that you are choosing to treat any 2010

Publication 536 (2010)

Page 7

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2010 Page 7

Related Articles

Related forms

Related Categories