Regular tax and AMT NOLs subject to single carryback waiver election.

• Author: Fiore, Nicholas J.

In 1983, P reported an alternative mininum tax (AMT) liability. In 1984, he sustained a net operating loss (NOL) and an AMT NOL. On his 1984 return, he stated that he elected to forgo the regular NOL carrybac period; P, however, attempted to carry back his AMT NOLs. The IRS refused to allow this carryback and determined a deficiency against P. The Tax Court (opinion Baum, J.) agrees with the Service. Both the regular tax and AMT NOLs are governed by a single carryback period, to which a single election may apply. However, P's attempted election was invalid. As such, he was entitled (and actually required) to carry back to his AMT NOLs before carrying them forward; at the same time, he was also required to carry back his regular tax NOLs.

At issue is the efect of P's attempt under Sec. 172(b)(3)(C) to relinquish the entire carryback period with respect to his regular NOL for the tax year while at the same time preserving the right to carry back the AMT NOL for the same year. The case involves the interplay between the Sec. 172 NOL carryback and carryover provisions and the Sec. 55 AMT.

Sec. 172(a) grants an NOL deduction for a tax year in an amount equal to the sum of the NOL carryovers and carrybacks to that year. Sec. 172(b)(2) establishes the manner in which NOLs are carried backward and forward from the year in which they were incurred. In general, the NOL is required to be carried back to the earliest available year of the carryback period, and then (to the extent not absorbed) to be carried over successively to the next year or years all the way through the remainder of the carryback period and the full carryover period until completely absorbed.

A taxpayer may elect to relinquish the carryback period with respect to the loss sustained in a given year (Sec. 172(b)(3)(C)). If the taxpayer so elects, he does not carry back the NOL sustained in that year to any year in the carryback period, and no part of such loss is allowed as a deduction in any year in that period. Accordingly, no part of the NOL is absorbed by taxable income in the carryback period. The entire NOL is instead carried forward to the earliest year in the carryover period. An election under Sec. 172(b)(3)(C) is irrevocable, and applies to all of the carryback years relating to the loss year for which the election is made.

Sec. 55 imposes an AMT on noncorporate taxpayers. See. 55(a) provides that the AMT is equal to 20% of so much of the alternative minimum taxable income...