Discussion:C Corp NOL carryback (actual procedure)
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Discussion Forum Index --> Consumer Questions --> C Corp NOL carryback (actual procedure)
| 23 August 2006 | |
| I've got a NOL for a C corp in FY2005 and I want to carry it back to FY2003 and FY2004.
I don't understand how the actual procedure for doing this works and would appreciate any comments: The instructions for form 1120 state that carryback claims should use either form 1120X or form 1139, and based on my reading of the rules, I should use form 1120X for both FY2003 and FY2004 because it is more than 1 year since either of those returns were filed. Fine, but how does one put a NOL carryback on form 1120X? There is a box to check on page 2 of form 1120X regarding carrybacks, but there are no instructions about what modifications to do on the original form 1120 to make the numbers on page 1 of the 1120X come out correctly (I am using Turbotax Business 2005). I'd like to put the carryback on line 29a of the FY2003 1120, but the instructions specifically say that this line is for carryforwards. I've gone ahead and added a new deduction on line 26 of the FY2003 1120, calling it "NOL Carryback from FY2005". This gives me the correct numbers for the 1120X in Turbotax, but I have no idea if this is the correct way to do a carryback. | |
| 24 August 2006 | |
| No need for 1120X, just do Form 1139. It is very simple. You will claim both refunds in just one form. | |
| 24 August 2006 | |
| OK, so after I re-read the instructions for form 1139, it looks like it can be used within 1 year of the year that the NOL was sustained, not within 1 year of the year the carryback is used, which is the way I originally read it.
I will use form 1139 for this case. Thanks for your response. But I'm still curious -- what *is* the procedure to use form 1120X to take a NOL carryback? | |
- The following consumer question and its related answers were moved from a tax pro discussion:
| 8 August 2008 | |
| If I have 1120s for 2001 - 07, and there was profit in '01 and losses after - enough losses to completely wipe out tax liability for '01 - would no tax be owed because of the NOL carry back? In other words, no tax was ever sent in for 2001. ...Or would the IRS say the time has passed for NOL carrybacks and they must be carried forward, meaning penalities and interest would be due for 2001?
Thank you! | |
RoyDaleOne (talk|edits) said: | 8 August 2008 |
| S Corporations do not have NOL's, the loss is passed out to the shareholders. | |
| 8 August 2008 | |
| Tman's tax professional would also have to carry each NOL back the appropriate number of years, not just to the 2001 1040. | |
Death&Taxes (talk|edits) said: | 8 August 2008 |
| Roy, not sure he means 1120S, but rather the plural of 1120. Calling Karnak! | |
Death&Taxes (talk|edits) said: | 8 August 2008 |
| Where are the Grammar Police, Kevin? Someone spread the rumor that GP is a collective of retired English teachers, rendered obsolete by our society. | |
| 8 August 2008 | |
| User:Grammarpolice is a him or her, therefore where is is correct, depending on your definition of what is is | |
RoyDaleOne (talk|edits) said: | 8 August 2008 |
| Well, I have enough trouble understanding the facts and situations on a lot of the posts.
I see one thing, Kevin sees another, D&T well he want to be the GP, Riley, Dennis and almost everyone else who handle is not easily recalled by me such as RLMCPA which has no memory tricks available for me. What a guy to do? C***, or in alternative S***, I am doing free comments. I call them comments, if you want my best advice that cost money. LOL... | |
| 8 August 2008 | |
| Answer to TMan (assuming these are 1120 "C" corp returns) -- There would be penalties and interest on the penalties as well as interest on the unpaid balance due for the 2001 return. NOLs occurring in subsequent years can offset the tax due, but interest would be due through the due date of the year of the NOL. So, for example, if 2001 shows taxable income of $10 million and tax of $3.4 million and 2002 shows an NOL of $10 million, the 2002 NOL can be carried back to 2001 (assuming 2001 is the first year to carry back to) and offset the tax. Late payment penalities and late filing penalties would apply. Also, there would be interest owing on the $3.4 million through the due date of the 2002 return (assuming calendar year, so through 3/15/2003).
NOLs occurring in subsequent years cannot offset penalties. | |
- The following consumer question and its related answers were moved from a (different) tax pro discussion:
| 5 November 2008 | |
| Greetings,
I am dealing with someone that started a corporation a few years ago. The corporation has lost money all years but one, and owes the shareholder about $120,000. Unfortunately this was not setup as an S corp, but is a regular corporation. This person is also the president of the company. The individual sole shareholder will be declaring personal bankruptcy. Much of the reason for this is due to the large amount of personal debt (through credit cards, loans, loans from family members) used to loan to the corporation to hopefully increase profits. It has been advised by a bankruptcy attorney to not only declare personal bankruptcy, but also have the corporation declare bankruptcy (because of some guarantees and possible perceived liabilities from the corporation’s customers – when people sue a company they usually sue the officers also, etc). So the question is: If the corporation also declares bankruptcy, and the shareholder is wiped out as a creditor, would the shareholder (mentioned above and also has filed personal bankruptcy) be able to take a personal loss on his tax return for the $120,000 he loaned the company? (Of course if this corporation was an S corp this wouldn’t even be an issue, the losses would just flow through on the personal return.) What we are trying to accomplish is the same net effect – or as close to it as possible – as if the corporation was an S corp, or pretty close to it. Would it be feasible to start or have an S corp perform services for the corporation, then the corporation mentioned above files bankruptcy, wiping out the money owed to the S corp, thus creating a loss flowing through on the personal tax return that way? All creative ideas and feedback are welcomed. Many thanks in advance for your responses! | |
| November 5, 2008 | |
| TMAN: I expect there are two significant issues here. First, as relates to bankruptcies, I believe there is a rule that says, to the extent you have debt forgiven in bankrupcy, you must reduce the "tax basis" in items that would provide a tax benefit to you. So, for example, if you have $120k of debt forgiven, then you would have to reduce your tax basis in items that would result in a write off i.e. including bad debt write offs.
The second issue relates to treatment of bad debt write offs. Even though the shareholder loaned money to his wholly owned corporation, if uncollectible, the debt may be considered a non-business bad debt and capital loss and have to be written off as a short-term capital loss subject to the $3k/year maximum net write-off. | |
