CCA 200913022: A taxpayer could revisit a closed year to calculate an open-year NOL deduction

Plain-English summary

Chief Counsel addressed whether a taxpayer could recompute an item from a closed tax year when calculating a net operating loss deduction in an open year. The advice cites Tax Court decisions allowing the IRS to revisit a closed year for that limited computational purpose. It concludes that the same reasoning permits the taxpayer to make the recalculation. Mennuto v. Commissioner supplied a similar rule for an investment credit carryover.

Ruling snapshot

• Question: Could a taxpayer redetermine a closed-year net operating loss to calculate a section 172 deduction in an open year?
• Outcome: Advice given: yes, the taxpayer could use the same closed-year recalculation reasoning available to the IRS.
• Key authorities: IRC § 172; Mennuto v. Commissioner, 56 T.C. 910; Hill v. Commissioner, 95 T.C. 437 (1990); Calumet Indus., Inc. v. Commissioner, 95 T.C. 257 (1990).

Full text (IRS public release)

ID: CCA-781437-08 Number: 200913022
Release Date: 3/27/2009
Office: --------------
UILC: 6511.00-00, 6511.03-02

From: -------------------
Sent: Tue 7/8/2008 2:37 PM
To: ------------------
Cc:
Subject: RE: NOL issue

Hello,

Mennuto v. Commissioner, 56 T.C. 910 is a 1972 tax court case permitting taxpayer a similar recalculation in the investment credit carryover area. See also Hill v. Commissioner, 95 T.C. 437 (1990) and Calumet Indus., Inc. v. Commissioner, 95 T.C. 257, 276-277 (1990). The latter cases pertain to the Services ability to go back to a closed year to make a NOL redetermination for purposes of properly calculating the 172 deduction in an open year, but the same reasoning permits the taxpayer to do so as well.

Hopefully this addresses the issue in your matter.