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the amount and characterization of the nondeductible advanced
litigation costs.
II. Net Operating Losses
FINDINGS OF FACT
P&G incurred a $3,382 net operating loss (NOL) for its 1990
fiscal year. For the 1991 fiscal year, P&G incurred a $277,478
NOL, and it did not carry either the 1990 or 1991 NOL back to
prior fiscal years. In addition, no election was made waiving
the NOL carryback with respect to prior years. On its Federal
income tax returns for the years ended May 31, 1992 and 1993, P&G
reported taxable income of $163,295 and $239,422, respectively,
without considering the NOL deductions. P&G carried the 1990 and
1991 NOL’s forward, applying them first to absorb fiscal year
1992 taxable income, and the NOL balance (deduction) was then
carried forward and applied to the 1993 fiscal year.
P&G sent a letter to the Internal Revenue Service Center in
Fresno, California, on August 14, 1990, containing the following
statement/question:
QUESTION TO IRS. We have a loss for the year
6/1/89 -- 5/31/90. Are we required to carry that loss
back to previous years, requiring amendment of previous
years’ returns, or may we just carry the loss forward
to future years and thus avoid the necessity of
amending prior returns? Thank you for your assistance.
P&G did not receive a response.
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