skip navigation

Search Help
Navigation Help


Main Topics
A B C D E F G H I
J K L M N O P Q R
S T U V W X Y Z #


FAQs
Forms
Publications
Tax Topics


Comments
About Tax Map

previous page Previous Page: Publication 536 - Net Operating Losses (NOLs) for Individuals, Estates, and Trusts - How To Figure an NOL
next page Next Page: Publication 536 - Net Operating Losses (NOLs) for Individuals, Estates, and Trusts - How To Claim an NOL Deduction
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p536-002.htm#en_us_publink100096445

When To Use an NOL(p7)


rule
spacer

previous topic occurrence Net Operating Loss next topic occurrence

Generally, if you have an NOL for a tax year ending in 2008, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). You can, however, choose not to carry back an NOL and only carry it forward. See Waiving the Carryback Period, later. You cannot deduct any part of the NOL remaining after the 20-year carryforward period.
taxmap/pubs/p536-002.htm#en_us_publink100096446

NOL year.(p7)


rule
spacer

This is the year in which the NOL occurred.
taxmap/pubs/p536-002.htm#en_us_publink100096447

Exceptions to 2-Year Carryback Rule(p7)


rule
spacer

Exceptions to 2-Year Carryback Rule

Eligible losses, farming losses, qualified disaster losses, qualified GO Zone losses, qualified recovery assistance losses, qualified disaster recovery assistance losses, eligible small business losses, and specified liability losses, defined next, qualify for longer carryback periods.
taxmap/pubs/p536-002.htm#en_us_publink100096448

Eligible loss.(p7)


rule
spacer

The carryback period for eligible losses is 3 years. Only the eligible loss portion of the NOL can be carried back 3 years. An eligible loss is any part of an NOL that:
taxmap/pubs/p536-002.htm#en_us_publink100096449

Qualified small business.(p7)
spacer

A qualified small business is a sole proprietorship or a partnership that has average annual gross receipts (reduced by returns and allowances) of $5 million or less during the 3-year period ending with the tax year of the NOL. If the business did not exist for this entire 3-year period, use the period the business was in existence.
An eligible loss does not include a farming loss, a qualified disaster loss, a qualified GO Zone loss, a qualified recovery assistance loss, or a qualified disaster recovery assistance loss. An eligible loss also does not include an eligible small business loss for which you choose a 3, 4, or 5-year carryback period under section 172(b)(1)(H) of the Internal Revenue Code.
taxmap/pubs/p536-002.htm#en_us_publink100096450

Farming loss.(p7)


rule
spacer

The carryback period for a farming loss is 5 years. Only the farming loss portion of the NOL can be carried back 5 years. A farming loss is the smaller of:
  1. The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses were taken into account, or
  2. The NOL for the tax year.
taxmap/pubs/p536-002.htm#en_us_publink100096451

Farming business.(p7)
spacer

A farming business is a trade or business involving cultivation of land, raising or harvesting of any agricultural or horticultural commodity, operating a nursery or sod farm, raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees. The raising, shearing, feeding, caring for, training, and management of animals is also considered a farming business.
A farming business does not include contract harvesting of an agricultural or horticultural commodity grown or raised by someone else. It also does not include a business in which you merely buy or sell plants or animals grown or raised by someone else.
taxmap/pubs/p536-002.htm#en_us_publink100096452

Waiving the 5-year carryback.(p7)
spacer

You can choose to figure the carryback period for a farming loss without regard to the special 5-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 farming losses without regard to the special 5-year carryback rule. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink1000138468

Qualified disaster loss.(p7)


rule
spacer

The carryback period for a qualified disaster loss is 5 years. Only the qualified disaster loss portion of the NOL can be carried back 5 years. A qualified disaster loss is the smaller of:
  1. The sum of:
    1. Any losses attributable to a federally declared disaster and occurring in the disaster area, plus
    2. Any allowable qualified disaster expenses (even if you did not choose to treat those expenses as deductions in the current year), or
  2. The NOL for the tax year.
taxmap/pubs/p536-002.htm#en_us_publink1000151782

Qualified disaster expenses.(p7)
spacer

A qualified disaster expense is any capital expense paid or incurred in connection with a trade or business or with business-related property which is: Business-related property is property held for use in a trade or business, property held for the production of income, or inventory property.
Note.Internal Revenue Code section 198A allows taxpayers to treat certain capital expenses (qualified disaster expenses) as deductions in the year the expenses were paid or incurred.
taxmap/pubs/p536-002.htm#en_us_publink1000151784

Excluded losses.(p7)
spacer

A qualified disaster loss does not include any losses from property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store for which the principal business is the sale of alcoholic beverages for consumption off premises.
A qualified disaster loss also does not include any losses from any gambling or animal racing property. Gambling or animal racing property is any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and the portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet.
taxmap/pubs/p536-002.htm#en_us_publink1000138467

Waiving the 5-year carryback.(p7)
spacer

You can choose to figure the carryback period for a qualified disaster loss without regard to the special 5-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 qualified disaster losses without regard to the special 5-year carryback rule. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink100096453

Qualified GO Zone loss.(p7)


rule
spacer

The carryback period for a qualified GO Zone loss is 5 years. Only the qualified GO Zone loss portion of the NOL can be carried back 5 years. For tax years beginning in 2008, a qualified GO Zone loss is the smaller of:
  1. The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or
  2. The total of any depreciation allowable for qualified GO Zone nonresidential real property and residential rental property placed in service in 2008 and specified GO Zone extension property placed in service in 2009 during the tax year (even if you elected not to claim the special GO Zone depreciation allowance for such property).
See Publication 4492 for a list of counties and parishes included in the GO Zone.
taxmap/pubs/p536-002.htm#en_us_publink100096455

Waiving the 5-year carryback.(p7)
spacer

You can choose to figure the carryback period for a qualified GO Zone loss without regard to the special 5-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 qualified GO Zone losses without regard to the special 5-year carryback rule. If you filed your original return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink1000151785

Qualified recovery assistance loss.(p7)


rule
spacer

The carryback period for a qualified recovery assistance loss is 5 years. Only the qualified recovery assistance loss portion of the NOL can be carried back 5 years. For the definition of qualified recovery assistance loss, see page 2 of Publication 4492-A.
taxmap/pubs/p536-002.htm#en_us_publink1000151779

Waiving the 5-year carryback.(p8)
spacer

You can choose to figure the carryback period for a qualified recovery assistance loss without regard to the special 5-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 qualified recovery assistance losses without regard to the special 5-year carryback rule. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink1000151780

Qualified disaster recovery assistance loss.(p8)


rule
spacer

The carryback period for a qualified disaster recovery assistance loss is 5 years. Only the qualified disaster recovery assistance loss portion of the NOL can be carried back 5 years. For the definition of qualified disaster recovery assistance loss, see page 5 of Publication 4492-B.
taxmap/pubs/p536-002.htm#en_us_publink1000151781

Waiving the 5-year carryback.(p8)
spacer

You can choose to figure the carryback period for a qualified disaster recovery assistance loss without regard to the special 5-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 qualified disaster recovery assistance losses without regard to the special 5-year carryback rule. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink1000151786

Eligible small business (ESB) loss.(p8)


rule
spacer

You can choose a 3, 4, or 5-year carryback period for an ESB loss. The 3, 4, or 5-year carryback period applies only to the ESB loss portion of the NOL. An ESB loss is the smaller of:
  1. The amount that would be the 2008 NOL if only income, gains, losses, and deductions attributable to ESBs were taken into account, or
  2. The 2008 NOL.
An ESB is a sole proprietorship, partnership, or S corporation that has average annual gross receipts (reduced by returns and allowances) of $15 million or less during the 3-year period ending with the tax year of the NOL. This gross receipts test is applied at the sole proprietorship, partnership, or corporate level, and the aggregation rules of Internal Revenue Code section 448(c)(2) apply. If the business did not exist for this entire 3-year period, use the period the business was in existence.
A 2008 NOL is any NOL for a tax year ending in 2008. For a fiscal year taxpayer with a tax year beginning in 2007 and ending in 2008, follow the instructions in this publication, except use a 2007 Form 1045 to claim an NOL attributable to an ESB loss. However, a fiscal year taxpayer can choose to treat an NOL for a tax year beginning in 2008 as a 2008 NOL. See Fiscal year taxpayers, later.
taxmap/pubs/p536-002.htm#en_us_publink1000151788

Electing a 3, 4, or 5-year carryback.(p8)
spacer

To choose a 3, 4, or 5-year carryback period for an ESB loss for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement the you are choosing a 3, 4, or 5-year carryback period under section 172(b)(1)(H) for any 2008 ESB loss. (When you make this choice, you can choose only one (3, 4, or 5) carryback period.) The return must be filed by the later of its due date (including extensions) or April 17, 2009. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions or, if later, by April 17, 2009). Attach a statement to your amended return, and, if filed after April 17, 2009, write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink1000151832

Changing your carryback period.(p8)
spacer

If you already filed a tax return for your 2008 NOL tax year, and you now want to choose a 3, 4, or 5-year carryback period for an ESB loss, you must file Form 1045 or an amended return (using Form 1040X or Form 1041) for the earliest tax year to which you are carrying back your 2008 NOL. The Form 1045 or amended return must be filed by the later of:
  1. 6 months after the due date (excluding extensions) for filing the tax return for your 2008 NOL tax year, or
  2. April 17, 2009.
Enter "2008 NOL Carryback Election Pursuant to Rev. Proc. 2009-19" across the top of the Form 1045 or amended return. If you already filed Form 1045 or an amended return to claim your 2008 NOL carryback, also enter "Amended NOL Carryback Election Pursuant to Rev. Proc. 2009-19" across the top of the amended Form 1045 or amended return.
taxmap/pubs/p536-002.htm#en_us_publink1000151833

Fiscal year taxpayers.(p8)
spacer

A fiscal year taxpayer can choose to treat an NOL for tax years beginning in 2008 as a 2008 NOL. To make this choice, attach to the tax return for the tax year beginning in 2008, a statement that you are choosing under section 172(b)(1)(H) to treat the NOL as a 2008 NOL. The return must be filed by the later of its due date (including extensions) or April 17, 2009. If you filed your return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return, and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
If you previously chose a 3, 4, or 5-year carryback period for an NOL for a tax year ending in 2008, you cannot make this choice (to treat an NOL for a tax year beginning in 2008 as a 2008 NOL). Also, if you choose to treat an NOL for a tax year beginning in 2008 as a 2008 NOL, any NOL for a tax year ending in 2008 is not a 2008 NOL.
taxmap/pubs/p536-002.htm#en_us_publink100096456

Specified liability loss.(p8)


rule
spacer

The carryback period for a specified liability loss is 10 years. Only the specified liability loss portion of the NOL can be carried back 10 years. Generally, a specified liability loss is a loss arising from:
  1. Reclamation of land,
  2. Dismantling of a drilling platform,
  3. Remediation of environmental contamination, or
  4. Payment under any workers compensation act.
Any loss from a liability arising from (1) through (4) above can be taken into account as a specified liability loss only if you used an accrual method of accounting throughout the period in which the act (or failure to act) occurred. For details, see section 172(f) of the Internal Revenue Code.
taxmap/pubs/p536-002.htm#en_us_publink100096457

Waiving the 10-year carryback.(p8)
spacer

You can choose to figure the carryback period for a specified liability loss without regard to the special 10-year carryback rule. To make this choice for 2008, attach to your 2008 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2008 specified liability losses without regard to the special 10-year carryback rule. If you filed your original return on time, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach a statement to your amended return and write "Filed pursuant to section 301.9100-2" at the top of the statement. Once made, this choice is irrevocable.
taxmap/pubs/p536-002.htm#en_us_publink100096458

Waiving the Carryback Period(p8)


rule
spacer

Waiving the Carryback Period

You can choose not to carry back your NOL. If you make this choice, then you can use your NOL only in the 20-year carryforward period. (This choice means you also choose not to carry back any alternative tax NOL.)
To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3) of the Internal Revenue Code.
If you filed your return timely but did not file the statement with it, you must file the statement with an amended return for the NOL year within 6 months of the due date of your original return (excluding extensions). Enter "Filed pursuant to section 301.9100-2" at the top of the statement.
Once you choose to waive the carryback period, it generally is irrevocable. However, there is an exception for ESB losses ( discussed next). If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year.
EIC
If you do not file this statement on time, you cannot waive the carryback period.
taxmap/pubs/p536-002.htm#en_us_publink1000151834

Revoking an election to waive the carryback period.(p8)


rule
spacer

If you previously chose under section 172(b)(3) to waive the carryback period for your 2008 NOL arising in a tax year ending before February 17, 2009, and you now want to choose a 3, 4, or 5-year carryback period for an ESB loss, you can revoke your choice by filing Form 1045 or an amended return (using Form 1040X or Form 1041) for the earliest tax year to which you are carrying back your 2008 NOL. The Form 1045 or amended return must be filed by April 17, 2009. Enter "2008 NOL Carryback Election and Revocation of NOL Carryback Waiver Pursuant to Rev. Proc. 2009-19" across the top of the Form 1045 or amended return.
taxmap/pubs/p536-002.htm#en_us_publink100096460

How To Carry an NOL Back or Forward(p9)


rule
spacer

How To Carry an NOL Back or Forward

If you choose to carry back the NOL, you must first carry the entire NOL to the earliest carryback year. If your NOL is not used up, you can carry the rest to the next earliest carryback year, and so on.
If you do not use up the NOL in the carryback years, carry forward what remains of it to the 20 tax years following the NOL year. Start by carrying it to the first tax year after the NOL year. If you do not use it up, carry the unused part to the next year. Continue to carry any unused part of the NOL forward until the NOL is used up or you complete the 20-year carryforward period.
taxmap/pubs/p536-002.htm#en_us_publink100096461

Example 1.(p9)

You started your business as a sole proprietor in 2008 and had a $42,000 NOL for the year. No part of the NOL qualifies for the 3-year, 5-year, or 10-year carryback (and you did not choose a 3, 4, or 5-year carryback period for any ESB losses). You begin using your NOL in 2006, the second year before the NOL year, as shown in the following chart.
Year Carryback/
Carryover
Unused
Loss
2006$42,000$40,000
200740,00037,000
2008 (NOL year)  
200937,00031,500
201031,50022,500
201122,50012,700
201212,7004,000
20134,000-0-
If your loss were larger, you could carry it forward until the year 2028. If you still had an unused 2008 carryforward after the year 2028, you could not deduct it.
taxmap/pubs/p536-002.htm#en_us_publink100096462

Example 2.(p9)

Assume the same facts as in Example 1, except that $4,000 of the NOL is attributable to a casualty loss and this loss qualifies for a 3-year carryback period. You begin using the $4,000 in 2005. As shown in the following chart, $3,000 of this NOL is used in 2005. The remaining $1,000 is carried to 2006 with the $38,000 NOL that you must begin using in 2006.
Year Carryback/
Carryover
Unused
Loss
2005$4,000$1,000
200639,00037,000
200737,00034,000
2008 (NOL year)  
200934,00028,500
201028,50019,500
201119,5009,700
20129,7001,000
20131,000-0-
previous pagePrevious Page: Publication 536 - Net Operating Losses (NOLs) for Individuals, Estates, and Trusts - How To Figure an NOL
next pageNext Page: Publication 536 - Net Operating Losses (NOLs) for Individuals, Estates, and Trusts - How To Claim an NOL Deduction
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication