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CARES Act Adds Flexibility to Net Operating Losses

 

Revenue Procedure 2020-24 provides guidance to taxpayers with net operating losses that are carried back under the CARES Act by providing procedures for:

  • Waiving the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021.
  • Disregarding certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period.
  • Waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017.

In Notice 2020-26, the IRS grants a six-month extension to file Form 1045 or Form 1139, as applicable, with respect to the carryback of a net operating loss that arose in any taxable year that began during calendar year 2018 and ended on or before June 30, 2019. Individuals, trusts and estates would file Form 1045, and corporations would file Form 1139.

On April 8, 2020, the IRS issued Revenue Procedure 2020-23, allowing eligible partnerships to file amended partnership returns using Form 1065, U.S. Return of Partnership Income, by checking the "Amended Return" box and issuing amended Schedules K-1, Partner's Share of Income, Deductions, Credits, to each of its partners. Partnerships filing these amended returns should write "Filed Pursuant to Rev Proc 2020-23" at the top of the amended return.

Even under normal rules, net operating loss calculations are complex, so be sure to reach out for professional advice on how these new rules affect your business.

 

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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