Net operating loss

Under U.S. Federal income tax law, a net operating loss (NOL) occurs when certain tax-deductible expenses exceed taxable revenues for a taxable year.[1] If a taxpayer is taxed during profitable periods without receiving any tax relief (e.g. a refund) during periods of NOLs, an unbalanced tax burden results.[2] Consequently, in some situations, Congress allows taxpayers to use the losses in one year to offset the profits of other years. This provision is achieved through the carryback (as far back as 5 years per section 1211 of the American Recovery and Reinvestment Act of 2009) and carryforward of NOLs.[3]

Notes

  1. โ†‘ Kieso, Weygandt J. and Terry D. Warfield. Fundamentals of Intermediate Accounting, John Wiley & Sons, 2006. p.699 ISBN 0-471-75272-X
  2. โ†‘ Donaldson, Samual A. Federal Income Taxation of Individuals: Cases, Problems and Materials, ThomsonWest, 2 ed. 2007. p.301 ISBN 978-0-314-17597-7
  3. โ†‘ See generally 26 U.S.C. ยง 172.
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