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What type of loss is it? Is it a Net Operating Loss (NOL), or a capital loss
? If a NOL, the following applies;
Generally, if you have an NOL for a tax
year ending in 2010, you must carry back the entire amount of the NOL to the 2 tax years
before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). You can, however, choose not to carry back an NOL and only carry it forward. See Waiving the Carryback Period , later. You cannot deduct any part of the NOL remaining after the 20-year carryforward period.
NOL year. This is the year in which the NOL occurred.
Waiving the Carryback Period
You can choose not to carry back your NOL. If you make this choice, then you can use your NOL only in the 20-year carryforward period. (This choice means you also choose not to carry back any alternative
To make this choice, attach a statement to your original return
filed by the due date
) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3) of the Internal Revenue Code
If you filed your return timely but did not file the statement with it, you must file the statement with an amended return
for the NOL year within 6 months of the due date of your original return (excluding extensions). Enter “Filed pursuant to section(NNN) NNN-NNNN2” at the top of the statement.
Once you choose to waive the carryback period, it generally is irrevocable. If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year.
Deducting a Carryforward
If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction
as a negative figure on the Other income
line of Form 1040
1040NR (line 21 for 2010). Estates and trusts include an NOL deduction on Form 1041
with other deductions
not subject to the 2% limit (line 15a for 2010).
You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them.
For more detailed information regarding NOLs, you can refer to the following IRS
If the loss that you are referring to is a capital loss, then you can only claim a maximum of $3,000 per year On the form 8949, (which the amounts will transfer over to the Schedule D
) until the loss amount is exhausted. Any remaining amount of loss will be carried forward to future years.