Diesel Performance, Inc. - Page 4




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                               ELECTION TO RELINQUISH                                 
                         NET OPERATING LOSS CARRYBACK PERIOD                          
                              DIESEL PERFORMANCE, INC.                                
                                   EIN: 94-2194385                                    
                                      FORM 1120                                       
                           Fiscal Year Ended June 30, 1992                            
               Taxpayer incurred a net operating loss in its taxable                  
               year ended June 30, 1992, and is entitled to a three-                  
               year carryback period with respect to that loss under                  
               Code Section 172(b)(1) of the Internal Revenue Code.                   
               Pursuant to Code Section 172(b)(3)(C), the taxpayer                    
               hereby elects to relinquish the entire carryback period                
               with respect to the net operating loss incurred in its                 
               taxable year ended June 30, 1992.                                      
               On petitioner's Form 1120 filed for the tax year ending June           
          30, 1994, petitioner claimed a reduction in gross income in an              
          amount representing the net operating loss from the June 30,                
          1992, period.  In auditing petitioner's June 30, 1994, Form 1120,           
          respondent disallowed the net operating loss carryover from June            
          30, 1992, on the grounds petitioner had not included a valid                
          election to waive the carryback period on a return filed by the             
          original due date.                                                          
               Respondent issued a notice of deficiency for the taxable               
          year ending June 30, 1994, disallowing $55,769 of the net                   
          operating loss petitioner attempted to carry forward to the June            
          30, 1994, taxable year.                                                     
               On petitioner's original Forms 1120 for the taxable years              
          ending June 30, 1989, and 1990, petitioner reported net taxable             
          income of $109,646 and $191,445, respectively.                              





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