John M. Harding and Mary J. Harding - Page 2




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          submitted fully stipulated under Rule 122.1  On their 1994 income            
          tax return, petitioners attempted to waive the carryback of their            
          claimed net operating loss (NOL).  Petitioners now claim their               
          attempt was without effect.  The question we consider is whether             
          petitioners properly elected to waive the carryback of an NOL                
          under section 172(b)(3) and whether that election is binding.                
               Background--Petitioners resided in Yorba Linda, California,             
          at the time their petition was filed in this case.  Petitioners              
          filed a timely 1991 joint Federal income tax return reflecting a             
          $11,231 income tax liability.  Petitioners filed a timely 1994               
          joint Federal income tax return containing the following                     
          statement:                                                                   
               The above named taxpayer incurred a net operating loss                  
               in the taxable year ending December 31, 1994 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), the taxpayer hereby                 
               elects to relinquish the entire carryback period with                   
               respect to the net operating loss incurred in the                       
               taxable year ending December 31, 1994.                                  
               Prior to filing their 1994 return, petitioners had claimed a            
          NOL for their 1993 taxable year that had been carried back to                
          their 1991 tax year and caused the elimination of their 1991                 
          income tax liability.  After petitioners had filed their 1994                


               1  All Rule references are to this Court’s Rules of Practice            
          and Procedure and all section references are to the Internal                 
          Revenue Code, in effect for the taxable year in question.                    





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