If a taxpayer has a net operating loss (NOL)in 2016 of $20,000,of which $8,000 is attributable to a theft of rental use property,the taxpayer may:

Question

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According to the IRS rules, NOLs can be carried back for two years or carried forward for up to 20 years. However, if the NOL is attributable to a theft, the taxpayer may elect to carry back the loss for three years instead of two. Therefore, in this case, the taxpayer can carry $8,000 of the NOL back three years (due to being attributable to theft), and the remaining $12,000 can be carried back two years. Option A and B are incorrect because both allow for the entire NOL to be carried back, which is not allowed due to the theft portion. Option D is incorrect because it includes Option A and B, which are incorrect. Option E is incorrect because there is an option to carry back a portion of the NOL.

If a Taxpayer Has a Net Operating Loss (NOL)in 2016