20 CRR-NY 3-8.5NY-CRR
20 CRR-NY 3-8.5
20 CRR-NY 3-8.5
3-8.5 Aggregating net operating losses.
When the net operating losses of two or more years, or the portions of net operating losses of two of more years, are carried back or carried forward to be deducted from the income of one particular taxable year, the Tax Commission requires that an aggregate method of deducting the losses be used. The taxpayer must compute the aggregate of the Federal net operating losses to be carried to the particular taxable year, and, also, compute the aggregate of the net operating losses under article 9-A for such year.
After computing the two aggregate figures, whichever of the two (Federal or State) is smaller is the aggregate net operating loss which is allowable as a carry back or carry forward to the particular taxable year. The limitations described in subdivisions (b), (c) and (d) of section 3-8.2 of this Subpart apply in deducting the aggregate of losses.
Example 1:
Assume that a taxpayer has a net operating loss in taxable year 1973. The taxpayer also had a net operating loss in taxable year 1970 which was carried forward to taxable year 1971. For Federal income tax purposes the 1970 loss was $6,000 and the 1973 loss was $4,000. For purposes of article 9-A, the taxpayer had losses of $7,000 and $3,500, for these years respectively. Since the Federal aggregate loss of $10,000 is smaller than the New York State aggregate loss of $10,500, the maximum allowable deduction is $10,000. The taxpayer had taxable income in taxable years 1971 and 1972 from which it could deduct the allowable aggregate of the losses. The computations for 1971 and 1972 are as follows:
| 1971 | |||
|---|---|---|---|
| Federal | State | ||
| 1971 Income | $8,000 | $7,280 | |
| Net Operating Loss Deducted | 8,000 | 8,000 | |
| Taxable Income | $ 0 | ($ 720)* | |
| 1972 | |||
| 1972 Income | $2,500 | $2,275 | |
| Net operating loss deducted | 2,000 | 2,000 | (Balance of aggregate) |
| Taxable income | $ 500 | $ 275 |
*
This loss may not be carried back or forward as a net operating loss deduction.
Example 2:
Assume that a taxpayer has a net operating loss in taxable year 1973. The taxpayer also had a net operating loss in taxable year 1970 which was carried forward to taxable year 1971. For Federal income tax purposes the 1970 loss was $3,000 and the 1973 loss was $10,000. For purposes of article 9-A, the taxpayer had losses of $2,000 and $9,000, for these years respectively. Since the New York State aggregate loss of $11,000 is smaller than the Federal aggregate loss of $13,000, the maximum allowable deduction is $11,000. The taxpayer had taxable income in taxable years 1971 and 1972 from which it could deduct the allowable aggregate of the losses. The computations for 1971 and 1972 are as follows:
| 1971 | |||
|---|---|---|---|
| Federal | State | ||
| 1971 Income | $4,000 | $5,000 | |
| Net operating loss deducted | 4,000 | 4,000 | |
| Taxable income | $ 0 | $1,000 | |
| 1972 | |||
| 1972 Income | $8,000 | $8,100 | |
| Net operating loss deducted | 8,000 | 7,000 | (Balance of Aggregate) |
| Taxable income | $ 0 | $1,100 |
For Federal purposes a loss of $1,000 is available as a carry forward to a year following 1973. However, none of the New York State loss is available as a carry forward because the total of the New York State losses was absorbed by 1971 and 1972 income.
Footnotes
*
This loss may not be carried back or forward as a net operating loss deduction.
20 CRR-NY 3-8.5
Current through February 28, 2023
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