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Discussion
Section 172(a) allows a "net operating loss deduction" for
the aggregate of net operating loss carrybacks and carryovers to
the taxable year. The term "net operating loss" (NOL) is defined
in section 172(c) to mean the excess of deductions allowed by
chapter 1 over gross income. Section 172(b) prescribes the
periods for NOL carrybacks and carryovers. Section 172(b)(1)(A)
generally provides that the period for an NOL carryback is 3
years and that the period for an NOL carryover is 15 years.1
Section 172(b)(1)(C) provides a special rule that extends the
carryback period from 3 years to 10 years for specified liability
losses.2 The term "specified liability loss" is defined in
section 172(f), which provides in pertinent part:
SEC. 172(f). Rules Relating to Specified Liability
Loss.-- For purposes of this section--
(1) In general.--The term “specified
liability loss” means the sum of the following
amounts to the extent taken into account in
computing the net operating loss for the taxable year:
1Effective for taxable years beginning after Aug. 5, 1997,
the carryback period for an NOL is 2 years and the carryforward
period is 20 years. Taxpayer Relief Act of 1997, Pub. L. 105-34,
sec. 1082(a), 111 Stat. 950.
2The Omnibus Budget Reconciliation Act of 1990 (OBRA 1990),
Pub. L. 101-508, sec. 11811(b), 104 Stat. 1388-532, combined
former sec. 172(j) (relating to product liability losses) and
172(k) (relating to deferred statutory or tort liability losses)
redesignating them sec. 172(f). The provision is effective for
net operating losses for taxable years beginning after Dec. 31,
1990. OBRA 1990 sec. 11811(c), 104 Stat. 1388-534.
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Last modified: May 25, 2011