A corporation generally figures and deducts a net operating loss (NOL) the same way an individual, estate, or trust does. However, a corporation’s NOL generally differs from an individual, estate, or trusts’ NOL in the following ways:
- A corporation can take different deductions when figuring an NOL
- A corporation must make different modifications to its taxable income in the carryback or carryforward year when figuring how much of the NOL is used and how much is carried over to the next year
- A corporation uses different forms when claiming an NOL deduction
The general rules for a corporation’s NOL is that it must carry an NOL back two years prior to the year the NOL is generated, and if the NOL is not used in the prior two years, then the remaining NOL can be carried forward for up to 20 years after the tax year in which the NOL was generated.
A corporation can make an election to waive the two year carryback period and use only the 20 year carryforward period by attaching a statement to the original return filed by the due date (including extensions) for the NOL year.
A corporation carries forward its NOL by entering the amount of the carryover on Schedule K of Form 1120 Line 12 and on Line 29(a) of Form 1120 or line 25(a) of Form 1120-A.