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CFR > Title 26 - Internal Revenue > CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY > SUBCHAPTER A—INCOME TAX (Parts 1–19) > PART 1—INCOME TAXES > 1.812-8—Illustration of operations loss carrybacks and carryovers.

CFR

1.812-8—Illustration of operations loss carrybacks and carryovers.

The application of § 1.812-4 may be illustrated by the following example:

Code of Federal Regulations

(a) Facts. The books of M, a life insurance company, organized in 1940, reveal the following facts:
Taxable year Taxable investment income Gain from operations Loss from operations
1958 $11,000 $15,000
1959 23,000 30,000
1960 ($75,000)
1961 25,000 20,000
1962 (150,000)
1963 22,000 30,000
1964 40,000 35,000
1965 62,000 75,000
1966 25,000 17,000
1967 39,000 53,000
The gain from operations thus shown is computed without regard to any operations loss deduction. The assumption is also made that none of the other modifications prescribed in paragraph (b) of § 1.812-5 apply. There are no losses from operations for 1955, 1956, 1957, 1968, 1969, 1970. (b) Loss sustained in 1960. The portions of the $75,000 loss from operations for 1960 which shall be used as carrybacks to 1958 and 1959 and as carryovers to 1961, 1962, 1963, 1964, and 1965 are computed as follows: (1) Carryback to 1958. The carryback to this year is $75,000, that is, the amount of the loss from operations. (2) Carryback to 1959. The carryback to this year is $60,000 (the excess of the loss for 1960 over the offset for 1958), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) 15,000
Carryback 60,000
(3) Carryover to 1961. The carryover to this year is $30,000 (the excess, if any, of the loss for 1960 over the sum of the offsets for 1958 and 1959), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) $15,000
Offset for 1959 (the $30,000 gain from operations for such year computed without the deduction of the carryback from 1960 or the carryback from 1962) 30,000
Sum of offsets 45,000
Carryover 30,000
(4) Carryover to 1962. The carryover to this year is $10,000 (the excess, if any, of the loss for 1960 over the sum of the offsets for 1958, 1959, and 1961), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) $15,000
Offset for 1959 (the $30,000 gain from operations for such year computed without the deduction of the carryback from 1960 or the carryback from 1962) 80,000
Offset for 1961 (the $20,000 gain from operations for such year computed without the deduction of the carryover from 1960 or the carryback from 1962) 20,000
Sum of offsets 65,000
Carryover 10,000
(5) Carryover to 1963. The carryover to this year is $10,000 (the excess, if any, of the loss for 1960 over the sum of the offsets for 1958, 1959, 1961, and 1962), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) $15,000
Offset for 1959 (the $30,000 gain from operations for such year computed without the deduction of the carryback from 1960 or the carryback from 1962) 30,000
Offset for 1961 (the $20,000 gain from operations for such year computed without the deduction of the carryover from 1960 or the carryback from 1962) 20,000
Offset for 1962 (a year in which a loss from operations was sustained) 0
Code of Federal Regulations 761
Sum of offsets 65,000
Carryover 10,000
(6) Carryover to 1964. The carryover to this year is $0 (the excess, if any, of the loss from 1960 over the sum of the offsets for 1958, 1959, 1961, 1962, and 1963), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) $15,000
Offset for 1959 (the $30,000 gain from operations for such year computed without the deduction of the carryback from 1960 or the carryback from 1962) 30,000
Offset for 1961 (the $20,000 gain from operations for such year computed without the deduction of the carryover from 1960 or the carryback from 1962) 20,000
Offset for 1962 (a year in which a loss from operations was sustained) 0
Offset for 1963 (the $30,000 gain from operations for such year computed without the deduction of the carryover from 1960 or the carryover from 1962) 30,000
Sum of offsets 95,000
Carryover 0
(7) Carryover to 1965. The carryover to this year is $0 (the excess, if any, of the loss from 1960 over the sum of the offsets for 1958, 1959, 1961, 1962, 1963, and 1964), computed as follows:
Loss from operations $75,000
Less:
Offset for 1958 (the $15,000 gain from operations for such year computed without the deduction of the carryback from 1960) $15,000
Offset for 1959 (the $30,000 gain from operations for such year computed without the deduction for the carryback from 1960 or the carryback from 1962) 30,000
Offset for 1961 (the $20,000 gain from operations for such year computed without the deduction for the carryover from 1960 or the carryback from 1962) 20,000
Offset for 1962 (a year in which a loss from operations was sustained) 0
Offset for 1963 (the $30,000 gain from operations for such year computed without the deduction for the carryover from 1960 or the carryover from 1962) 30,000
Offset for 1964 (the $35,000 gain from operations for such year computed without the deduction of the carryover from 1960 or the carryover from 1962) 35,000
Sum of offsets 130,000
Carryover 0
(c) Loss sustained in 1962. The portions of the $150,000 loss from operations for 1962 which shall be used as carrybacks to 1959, 1960, and 1961 and as carryovers to 1963, 1964, 1965, 1966, and 1967 are computed as follows: (1) Carryback to 1959. The carryback to this year is $150,000, that is, the amount of the loss from operations. (2) Carryback to 1960. The carryback to this year is $150,000 (the excess, if any, of the loss from 1962 over the offset for 1959), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Carryback 150,000
(3) Carryback to 1961. The carryback to this year is $150,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959 and 1960), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Sum of offsets 0
Carryback 150,000
(4) Carryover to 1963. The carryover to this year is $150,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959, 1960, and 1961), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Offset for 1961 (the $20,000 gain from operations for such year reduced by the carryover to such year of $30,000 from 1960, the carryback from 1962 to 1961 not being taken into account) 0
Code of Federal Regulations 762
Sum of offsets 0
Carryover 150,000
(5) Carryover to 1964. The carryover to this year is $130,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959, 1960, 1961, and 1963), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Offset for 1961 (the $20,000 gain from operations for such year reduced by the carryover to such year of $30,000 from 1960, the carryback from 1962 to 1961 not being taken into account) 0
Offset for 1963 (the $30,000 gain from operations for such year reduced by the carryover to such year of $10,000 from 1960, the carryover from 1962 to 1963 not being taken into account) 20,000
Sum of offsets 20,000
Carryover 130,000
(6) Carryover to 1965. The carryover to this year is $95,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959, 1960, 1961, 1963, and 1964), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Offset for 1961 (the $20,000 gain from operations for such year reduced by the carryover to such year of $30,000 from 1960 the carryback from 1962 to 1961 not being taken into account) 0
Offset for 1963 (the $30,000 gain from operations for such year reduced by the carryover to such year of $10,000 from 1960, the carryover from 1962 to 1963 not being taken into account) 20,000
Offset for 1964 (the $35,000 gain from operations for such year reduced by the carryover to such year of $0 from 1960, the carryover from 1962 to 1964 not being taken into account) 35,000
Sum of offsets 55,000
Carryover 95,000
(7) Carryover to 1966. The carryover to this year is $20,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959, 1960, 1961, 1963, 1964, and 1965), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Offset for 1961 (the $20,000 gain from operations for such year reduced by the carryover to such year of $30,000 from 1960, the carryback from 1962 to 1961 not being taken into account) 0
Offset for 1963 (the $30,000 gain from operations for such year reduced by the carryover for such year of $10,000 from 1960, the carryover from 1962 to 1963 not being taken into account) 20,000
Offset for 1964 (the $35,000 gain from operations for such year reduced by the carryover to such year of $0 from 1960, the carryover from 1962 to 1964 not being taken into account) 35,000
Offset for 1965 (the $75,000 gain from operations for such year reduced by the carryover to such year of $0 to 1960, the carryover from 1962 to 1965 not being taken into account) $75,000
Code of Federal Regulations 763
Sum of offsets $130,000
Carryover 20,000
(8) Carryover to 1967. The carryover to this year is $3,000 (the excess, if any, of the loss from 1962 over the sum of the offsets for 1959, 1960, 1961, 1963, 1964, 1965, and 1966), computed as follows:
Loss from operations $150,000
Less:
Offset for 1959 (the $30,000 gain from operations for such year reduced by the carryback to such year of $60,000 from 1960, the carryback from 1962 to 1959 not being taken into account) 0
Offset for 1960 (a year in which a loss from operations was sustained) 0
Offset for 1961 (the $20,000 gain from operations for such year reduced by the carryover to such year of $30,000 from 1960, the carryback from 1962 to 1961 not being taken into account) 0
Offset for 1963 (the $30,000 gain from operations for such year reduced by the carryover to such year of $10,000 from 1960, the carryover from 1962 to 1963 not being taken into account) 20,000
Offset for 1964 (the $35,000 gain from operations for such year reduced by the carryover to such year of $0 from 1960, the carryover from 1962 to 1964 not being taken into account) 35,000
Offset for 1965 (the $75,000 gain from operations for such year reduced by the carryover to such year of $0 from 1960, the carryover from 1962 to 1965 not being taken into account) 75,000
Offset for 1966 (the $17,000 gain from operations for such year computed without the deduction of the carryover from 1962) 17,000
Sum of offsets 147,000
Carryover 3,000
(d) Determination of operations loss deduction for each year. The carryovers and carrybacks computed under paragraphs (b) and (c) of this section are used as a basis for the computation of the operations loss deduction in the following manner:
Taxable year Carryover Carryback Operations loss de- ductions
From 1960 From 1962 From 1960 From 1962
1958 $75,000 $75,000
1959 60,000 $150,000 210,000
1961 $30,000 150,000 180,000
1963 10,000 $150,000 160,000
1964 130,000 130,000
1965 95,000 95,000
1966 20,000 20,000
1967 3,000 3,000

Code of Federal Regulations

[T.D. 6535, 26 FR 539, Jan. 20, 1961]
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