Question

I have an NOL and would benefit from claiming it in future tax years more than in previous tax years. Can I carry this loss forward instead of carrying it back?

Answer

Indeed you can! In fact, you did exactly the right thing by planning for your best result.

We need to point out that at the time you have to make the NOL forward or back decision, you likely have some facts but also some assumptions about the benefit of the carryforward to future years, whereas you know all the facts and can calculate the exact benefit of the carryback.

In your case, you know pretty well that your big tax-dollar benefits come from carrying forward your loss deductions.

But a warning to our readers: Don’t just go into this NOL willy-nilly without calculating the tax savings both ways. With proper tax planning of your NOLs, you can often reap huge tax savings!

Basic Rule

The tax code says that except as otherwise provided, an NOL for any taxable year1

shall be an NOL carryback to each of the two taxable years preceding the taxable year of such loss, and

shall be an NOL carryover to each of the 20 taxable years following the taxable year of the loss.

But didn’t we just say that you can carry the loss forward instead of carrying it back? Yes, and it’s true.

As you see by the word “except” above, the code contains an exception to the carryback that you can use to save yourself a lot of money. To use the exception, you “elect” to relinquish your entire NOL carryback period.2

The rules for electing the carryover and forgoing the carryback are extremely picky. If you don’t make the carryforward election to IRS specifications, you can kiss the carryforward good-bye. ... Log in to view full article.