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Respondent disallowed the 1983 and 1984 NOL’s in 1990 and
1991, contending that petitioner failed to first carry the losses
back and also failed to make an election to waive the carryback.
Petitioner admitted that the NOL's were carried forward
erroneously. Petitioner contended that if the NOL’s are
disallowed for 1990 and 1991, he should be entitled to carry them
back for refund to the proper years, 1980 and 1981, under the
mitigation provisions of the Code. Alternatively, he contended
that the refund should offset the deficiencies herein under some
equitable recoupment theory.
Discussion
Individuals are permitted to carry net operating losses from
one taxable year to another. Sec. 172(a). In general, taxpayers
who sustain NOL’s must first carry such losses back 3 years, and,
if unabsorbed by those years, then forward 15 years. Sec.
172(b)(1)(A) and (2). However, the taxpayer may elect to
relinquish the entire carryback period and simply carry the loss
forward for 15 succeeding years. Sec. 172(b)(3). To make this
election, the statute expressly requires the taxpayer to file the
election to relinquish the carryback period by the due date,
including extensions of time, for filing the taxpayer’s return
for the taxable year of the NOL. The election, once made, is
irrevocable. Moreover, the statute directs that the election
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