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election to waive the carryback period.2
Discussion
In general, the determinations of the Commissioner in a
notice of deficiency are presumed correct, and the burden is on
the taxpayer to show that the determinations are incorrect. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).3
Section 172(a) permits taxpayers to carry NOL deductions
from one taxable year to another. In general, taxpayers who
sustain NOLs must first carry such losses back 3 years, and, if
unabsorbed in the earlier years, then the losses may be carried
forward for as long as 15 years.4 Sec. 172(b)(1)(A) and (2).
However, taxpayers may elect to waive or relinquish the 3-year
carryback period and only carry forward their NOLs. Sec.
172(b)(3). To make this election, the statute expressly requires
taxpayers to file an election relinquishing the carryback period
by the return due date, including any extensions of time, for the
2 Petitioners concede that if no valid sec. 172(b)(3)
election was made, then their gross income for the 3 taxable
years prior to 1995 would absorb the entire amount of the 1995
NOL.
3 Sec. 7491(a) does not serve to place the burden of proof
on respondent because petitioners failed to introduce credible
evidence of an election to waive the carryback of the 1995 NOL.
See Higbee v. Commissioner, 116 T.C. 438 (2001).
4 For purposes of this case involving a 1995 net operating
loss and a 1996 taxable year, we consider sec. 172(b)(1)(A) prior
to its amendment by the Taxpayer Relief Act of 1997, Pub. L. 105-
34, sec. 1082(a)(1) and (2), 111 Stat. 950.
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