The application of § 1.172-4 may be illustrated by the following example:
Taxable year | Taxable income | Net operating loss |
1954 | $15,000 | |
1955 | 30,000 | |
1956 | ($75,000) | |
1957 | 20,000 | |
1958 | (150,000) | |
1959 | 30,000 | |
1960 | 35,000 | |
1961 | 75,000 | |
1962 | 17,000 | |
1963 | 53,000 |
The taxable income thus shown is computed without any net operating loss deduction. The assumption is also made that none of the other modifications prescribed in § 1.172-5 apply. There are no net operating losses for 1950, 1951, 1952, 1953, 1964, 1965, or 1966.
Net operating loss | $75,000 |
Less: | |
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | 15,000 |
Carryback | 60,000 |
Net operating loss | $75,000 | |
Less: | ||
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | $15,000 | |
Taxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) | 30,000 | |
45,000 | ||
Carryover | 30,000 |
Net operating loss | $75,000 | |
Less: | ||
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | $15,000 | |
Taxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) | 30,000 | |
Taxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) | 20,000 | |
65,000 | ||
Carryover | 10,000 |
Net operating loss | $75,000 | |
Less: | ||
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | $15,000 | |
Taxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) | 30,000 | |
Taxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) | 20,000 | |
Taxable income for 1958 (a year in which a net operating loss was sustained) | 0 | |
---- | 65,000 | |
Carryover | 10,000 |
Net operating loss | $75,000 | |
Less: | ||
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | $15,000 | |
Taxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) | 30,000 | |
Taxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) | 20,000 | |
Taxable income for 1958 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1959 (computed without the deduction of the carryover from 1956 or the carryover from 1958) | 30,000 | |
---- | 95,000 | |
Carryover | 0 |
Net operating loss | $75,000 | |
Less: | ||
Taxable income for 1954 (computed without the deduction of the carryback from 1956) | $15,000 | |
Taxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) | 30,000 | |
Taxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) | 20,000 | |
Taxable income for 1958 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1959 (computed without the deduction of the carryover from 1956 or the carryover from 1958) | 30,000 | |
Taxable income for 1960 (computed without the deduction of the carryover from 1956 or the carryover from 1958) | 35,000 | |
---- | 130,000 | |
Carryover | 0 |
Net operating loss | $150,000 |
Less: | |
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 |
Carryback | 150,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
---- | 0 | |
Carryback | 150,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1957 (the $20,000 taxable income for such year reduced by the carryover to such year of $30,000 from 1956, the carryback from 1958 to 1957 not being taken into account) | 0 | |
---- | 0 | |
Carryover | 150,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1957 (the $20,000 taxable income for such year reduced by the carryover to such year of $30,000 from 1956, the carryback from 1958 to 1957 not being taken into account) | 0 | |
Taxable income for 1959 (the $30,000 taxable income for such year reduced by the carryover to such year of $10,000 from 1956, the carryover from 1958 to 1959 not being taken into account) | $20,000 | |
---- | 20,000 | |
Carryover | 130,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1957 (the $20,000 taxable income for such year reduced by the carryover to such year of $30,000 from 1956, the carryback from 1958 to 1957 not being taken into account) | 0 | |
Taxable income for 1959 (the $30,000 taxable income for such year reduced by the carryover to such year of $10,000 from 1956, the carryover from 1958 to 1959 not being taken into account) | $20,000 | |
Taxable income for 1960 (the $35,000 taxable income for such year reduced by the carryover to such year of $0 from 1956, the carryover from 1958 to 1960 not being taken into account) | 35,000 | |
---- | 55,000 | |
Carryover | 95,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1957 (the $20,000 taxable income for such year reduced by the carryover to such year of $30,000 from 1956, the carryback from 1958 to 1957 not being taken into account) | 0 | |
Taxable income for 1959 (the $30,000 taxable income for such year reduced by the carryover to such year of $10,000 from 1956, the carryover from 1958 to 1959 not being taken into account) | $20,000 | |
Taxable income for 1960 (the $35,000 taxable income for such year reduced by the carryover to such year of $0 from 1956, the carryover from 1958 to 1960 not being taken into account) | 35,000 | |
Taxable income for 1961 (the $75,000 taxable income for such year reduced by the carryover to such year of $0 from 1956, the carryover from 1958 to 1961 not being taken into account) | 75,000 | |
---- | 130,000 | |
Carryover | 20,000 |
Net operating loss | $150,000 | |
Less: | ||
Taxable income for 1955 (the $30,000 taxable income for such year reduced by the carryback to such year of $60,000 from 1956, the carryback from 1958 to 1955 not being taken into account) | 0 | |
Taxable income for 1956 (a year in which a net operating loss was sustained) | 0 | |
Taxable income for 1957 (the $20,000 taxable income for such year reduced by the carryover to such year of $30,000 from 1956, the carryback from 1958 to 1957 not being taken into account) | 0 | |
Taxable income for 1959 (the $30,000 taxable income for such year reduced by the carryover to such year of $10,000 from 1956, the carryover from 1958 to 1959 not being taken into account) | $20,000 | |
Taxable income for 1960 (the $35,000 taxable income for such year reduced by the carryover to such year of $0 from 1956, the carryover from 1958 to 1960 not being taken into account) | 35,000 | |
Taxable income for 1961 (the $75,000 taxable income for such year reduced by the carryover to such year of $0 from 1956, the carryover from 1958 to 1961 not being taken into account) | 75,000 | |
Taxable income for 1962 (computed without the deduction of the carryover from 1958) | 17,000 | |
---- | 147,000 | |
Carryover | 3,000 |
Taxable year | Carryover | Carryback | Net operating loss deduction | ||
From 1956 | From 1958 | From 1956 | From 1958 | ||
1954 | $0 | $0 | $75,000 | $0 | $75,000 |
1955 | 0 | 0 | 60,000 | 150,000 | 210,000 |
1957 | 30,000 | 0 | 0 | 150,000 | 180,000 |
1959 | 10,000 | 150,000 | 0 | 0 | 160,000 |
1960 | 0 | 130,000 | 0 | 0 | 130,000 |
1961 | 0 | 95,000 | 0 | 0 | 95,000 |
1962 | 0 | 20,000 | 0 | 0 | 20,000 |
1963 | 0 | 3,000 | 0 | 0 | 3,000 |
26 C.F.R. §1.172-6