Competing extended carryback elections

Plain-English summary

The Chief Counsel advice considers competing carryback elections for consolidated-group net operating losses. One taxpayer requested a two-year carryback for one year, while a fiduciary and the common parent each made five-year extended carryback elections for different years. The advice states that only one of the competing elections for the first year could be accepted and that the IRS could use its discretion under the cited regulation to accept the common parent's filings and reject the fiduciary's initial election.

Ruling snapshot

• Question: May the IRS accept the common parent's carryback filings and reject the fiduciary's competing extended carryback election?
• Outcome: Advice given
• Key authorities: IRC § 6402; Treas. Reg. § 301.6402-7(f)

Full text (IRS public release)

ID: CCA_2013080813454917 [Third Party Communication:

UILC: 6402.03-02 Date of Communication: Month DD, YYYY]

Number: 201402008
Release Date: 1/10/2014
From: ---------------
Sent: Thursday, August 08, 2013 1:45:49 PM
To: ---------------------------------------------
Cc: ----------------------------------------------
Bcc:
Subject: Advice

For the Year 1 tax year, CP, the common parent of a consolidated group, filed a
tentative refund request based on a two-year carryback of the CNOLs of the group for
that year. Fiduciary made a five-year extended carryback election for those same
losses. The Service Center issued a tentative refund to CP with respect to its request.

For the Year 2 tax year, CP made a five-year extended carryback election for the
CNOLs of the group for that year. Fiduciary filed a document attempting to “reverse” its
previous five-year extended carryback election for Year 1 and elect a five-year extended
carryback for the Year 2 tax year as well.

Both Fiduciary’s five-year extended carryback election for Year 1 and CP’s five-year
extended carryback election for Year 2 were timely, but only one can be accepted.
Fiduciary has executed a Form 870 agreeing to its initial five-year extended carryback
election for Year 1, but the Service has not executed the Form 870 and the agreement
is pending --------------------------------.

The field has asked whether the Service can exercise its broad discretion under §
301.6402-7(f) to accept the filings by CP (request for a two-year carryback of the
CNOLs of the group for the Year 1 tax year and the five-year extended carryback
election of the CNOLs of the group for the Year 2 tax year) and not accept the filings by
Fiduciary (its initial five-year extended carryback election of the CNOLs of the group for
the Year 1 tax year). We advise that the Service may do so.