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taxmap/pubs/p4492-005.htm#TXMP6b16bb1d Net Operating Losses

Net Operating Loss

taxmap/pubs/p4492-005.htm#TXMP4acd22fb Qualified GO Zone loss.

Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD.

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 the following deductions (to the extent they are taken into account in computing the NOL for the tax year):
   1. Qualified GO Zone casualty loss (as defined below),
   2. Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone,
   3. Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone,
   4. Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and
   5. Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone.

taxmap/pubs/p4492-005.htm#TXMP3c632455 Qualified GO Zone casualty loss.

A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year.

taxmap/pubs/p4492-005.htm#TXMP3970c5fe 5-year NOL carryback of certain timber losses.

Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below.

1. August 27, 2005, if any portion of the property is located in the GO Zone.
2. September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone).
3. October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone).

These rules will not apply after 2006.

However, these rules apply only to a timber producer who:

1. Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below:
   1. August 28, 2005, if any portion of the property is located in the GO Zone,
   2. September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or
   3. October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone);
2. Is not a corporation with stock publicly traded on an established securities market;
3. Is not a real estate investment trust; and
4. Did not hold more than 500 acres of qualified timber property on the applicable date above.

taxmap/pubs/p4492-005.htm#TXMP5302ef63 More information.

For more information on NOLs, see Publication 536 or Publication 542, Corporations.

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