Form 1045 NOL

Today TaxMama hears from Marvin in the TaxQuips Forum who needs clarification “On Form 1045, where I can carry net operating losses back for up to five years, in what order do I do that? Do I start with the 5th yr, then the 4th yr, then 3,2,1? Or do I start with the most recent year and work back to the 5th year? How long is the carryforward period? My situation involves Go Zone properties.” 

Dear Marvin, 

Yes, I am familiar with Form 1045. By definition, it is designed to carry losses back, to generate a quick refund. You must file it before December 31st of the year after the NOL was created. (Or January 2, 2012, for 2010 losses.)  

Depending on the year the loss was created, and the relevant tax law related to NOLs, you can use Form 1045 to elect to carry the losses back anywhere from 2-5 years. Since, to use the Form 1045 this year, you must be dealing with a 2010 loss, the only options you have is to carry it back two years – except for GO Zones, farming and qualified disaster losses. GO Zones have a 3-year carryback. Farming and disasters have a 5-year carryback.  

The order to use the losses? Earliest year first (i.e. 3 years ago = 2007), then 2 years, then 1 year. Pub 536 shows you an example here.  Once you’ve used up the GO Zone loss in the three years, you can carry them forward to 2011. The carryforward period is up to 20 years.

And remember, you can find answers to all kinds of questions about net operating losses, and other tax issues, free. Where? Where else? At

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