Question

NOL Corporation filed its 20X3 tax return on March 15, 20X4, reporting a loss of $100,000. The corporate accountant simply chose to use the loss to offset income earned in 20X4 rather than carry the loss back to years 20X1 and 20X2.

The IRS is currently auditing the 20X3 tax return. On May 11, 20X7, the revenue agent proposed to disallow the loss carried forward to 20X4 because the taxpayer did not make an affirmative election to forego the carryback. See Code Sec. 172(b)(3). Is there anything the accountant can do to preserve the use of the net operating loss that was carried forward? Would your answer change if the Revenue Agent proposed to disallow the carryforward loss on March 13, 20X7?

Answer 1

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