Casualty-and theft loss carrybacks.The Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. (IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. ) helps taxpayers who suffer net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. (NOLs) by allowing the carryback and carryforward of such losses to offset other years' taxable income. The Taxpayer Relief Act of 1997 amended IRC Section 172(b) governing the carryback/carryforward provision for NOLs. It shortened the carryback to 2 years from 3 and increased the carryforward period to 20 years from 15. However, the three-year carryback period was not changed for NOLs attributed to individual casualty or theft losses or presidentially declared disaster area losses of small businesses or farming operations. Although guidance exists for the three-year carryback of a NOL entirely the result of a casualty-and-theft loss for tax years beginning after August 5, 1997, there is no guidance on the amount of carryback to the third year if only a portion of the NOL is from a casualty-and-theft loss. For example, a taxpayer with a business loss of $60,000, a casualty-and-theft loss of $40,000 and a salary of $20,000 would have a NOL of $80,000. It is not clear how much of the NOL or the casualty-and-theft loss ($40,000) could be carried back three years. A proration Proration A situation during a corporate action in which the available cash or shares are not sufficient to satisfy the offers tendered by shareholders. Therefore, a proportion of both cash and shares is granted for each offer tendered. could be made by comparing the casualty-and-theft loss amount to the total loss amount ($40,000/$100,000), resulting in only 40% of the NOL ($32,000) being carried back to the third year. Observation: More guidance is needed on the amount of carryback to the third year when only a portion of the NOL is from a casualty-and-theft loss. The past practice of providing relief as soon as possible to taxpayers suffering casualty-and-theft losses would seem to warrant allowing the entire casualty-and-theft loss to be carried back to the third year. Prorating prorating (prōrā´ting), n a clause in a contract with participating dental professionals wherein they agree to accept a percentage reduction in their billings to offset the amount by which the total cost of the carryback is less desirable because relief would be slow in coming and it would further complicate an already complex NOL process. --Keith W. Smith, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , PhD, associate professor of accountancy, and Tina Steward Quinn, CPA, PhD, assistant professor of accountancy, Arkansas State University Arkansas State University, at Jonesboro; coeducational; chartered 1909; named State Agricultural and Mechanical College, 1925–33. In 1933 the school became Arkansas State College, and in 1967 it achieved university status and adopted its present name. . |
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