Federal Tax, Tax

Validating Net Operating Loss Deductions

Generally, business taxpayers can deduct a net operating loss (NOL) from income when filing a tax return, but they bear the burden of showing an NOL is valid. Tax law defines an NOL as the excess of deductions over gross income. One couple was denied an NOL deduction on their joint return. Reasons for the denial included that the NOL was based partly on business expenses that the taxpayers weren’t personally liable for and pension liabilities that the couple hadn’t paid. The husband’s law degree caused the court to find that he should have known the regulations. The couple was assessed tax and an accuracy-related penalty due to negligence or disregard of the rules. (TC Memo 2024-64).  Contact us with questions. © 2024