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(i) shall be a net operating
loss carryback to each of the 3
taxable years preceding the taxable
year of such loss, and
(ii) shall be a net operating
loss carryover to each of the 15
taxable years following the taxable
year of the loss.
Under a plain reading of section 172(b)(1)(A)(i), a taxpayer
such as Mr. Lassiter must first apply an NOL loss to his third
taxable year preceding the loss, then apply any remaining portion
of that loss to his second taxable year preceding the loss, and
then apply any portion of the loss that still remains to his
taxable year immediately preceding the loss. If the NOL is not
fully absorbed in those 3 carryback years, or if the taxpayer
elects under section 172(b)(3) to waive the carryback of the NOL,
section 172(b)(1)(A)(ii) mandates that the unabsorbed NOL be
carried forward to, and applied in, the first taxable year
postdating the loss. Section 172(b)(1)(A)(ii) further mandates
that this carryover procedure follow for each of the next 14
years until the NOL is applied in full. With the exception of
section 172(b)(3), and certain other specialized rules set forth
in section 172(b), none of which are applicable here, the statute
does not provide explicitly any rule that would allow a taxpayer
to decline to apply an NOL in the year which is next in line
under the statutory scheme. As the U.S. Supreme Court has
observed with respect to the purpose of this statute:
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Last modified: May 25, 2011