{"data":{"id":"us/26-cfr-1.172-6","jurisdiction":"us","citation":"26 CFR 1.172-6","heading":"-6 Illustration of net operating loss carrybacks and carryovers.","body":"The application of § 1.172-4 may be illustrated by the following example:\n(a) Facts. The books of the taxpayer, whose return is made on the basis of the calendar year, reveal the following facts:\nTaxable year Taxable income Net operating loss\n1954 $15,000\n1955 30,000\n1956 ($75,000)\n1957 20,000\n1958 (150,000)\n1959 30,000\n1960 35,000\n1961 75,000\n1962 17,000\n1963 53,000\nThe 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.\n(b) Loss sustained in 1956. The portions of the $75,000 net operating loss for 1956 which shall be used as carrybacks to 1954 and 1955 and as carryovers to 1957, 1958, 1959, 1960, and 1961 are computed as follows:\n(1) Carryback to 1954. The carryback to this year is $75,000, that is, the amount of the net operating loss.\n(2) Carryback to 1955. The carryback to this year is $60,000, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) 15,000\nCarryback 60,000\n(3) Carryover to 1957. The carryover to this year is $30,000, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) $15,000\nTaxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) 30,000\n45,000\nCarryover 30,000\n(4) Carryover to 1958. The carryover to this year is $10,000, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) $15,000\nTaxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) 30,000\nTaxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) 20,000\n65,000\nCarryover 10,000\n(5) Carryover to 1959. The carryover to this year is $10,000, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) $15,000\nTaxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) 30,000\nTaxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) 20,000\nTaxable income for 1958 (a year in which a net operating loss was sustained) 0\n———— 65,000\nCarryover 10,000\n(6) Carryover to 1960. The carryover to this year is $0, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) $15,000\nTaxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) 30,000\nTaxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) 20,000\nTaxable income for 1958 (a year in which a net operating loss was sustained) 0\nTaxable income for 1959 (computed without the deduction of the carryover from 1956 or the carryover from 1958) 30,000\n———— 95,000\nCarryover 0\n(7) Carryover to 1961. The carryover to this year is $0, computed as follows:\nNet operating loss $75,000\nLess:\nTaxable income for 1954 (computed without the deduction of the carryback from 1956) $15,000\nTaxable income for 1955 (computed without the deduction of the carryback from 1956 or the carryback from 1958) 30,000\nTaxable income for 1957 (computed without the deduction of the carryover from 1956 or the carryback from 1958) 20,000\nTaxable income for 1958 (a year in which a net operating loss was sustained) 0\nTaxable income for 1959 (computed without the deduction of the carryover from 1956 or the carryover from 1958) 30,000\nTaxable income for 1960 (computed without the deduction of the carryover from 1956 or the carryover from 1958) 35,000\n———— 130,000\nCarryover 0\n(c) Loss sustained in 1958. The portions of the $150,000 net operating loss for 1958 which shall be used as carrybacks to 1955, 1956, and 1957 and as carryovers to 1959, 1960, 1961, 1962, and 1963 are computed as follows:\n(1) Carryback to 1955. The carryback to this year is $150,000, that is, the amount of the net operating loss.\n(2) Carryback to 1956. The carryback to this year is $150,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nCarryback 150,000\n(3) Carryback to 1957. The carryback to this year is $150,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\n———— 0\nCarryback 150,000\n(4) Carryover to 1959. The carryover to this year is $150,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\nTaxable 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\n———— 0\nCarryover 150,000\n(5) Carryover to 1960. The carryover to this year is $130,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\nTaxable 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\nTaxable 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\n———— 20,000\nCarryover 130,000\n(6) Carryover to 1961. The carryover to this year is $95,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\nTaxable 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\nTaxable 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\nTaxable 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\n———— 55,000\nCarryover 95,000\n(7) Carryover to 1962. The carryover to this year is $20,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\nTaxable 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\nTaxable 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\nTaxable 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\nTaxable 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\n———— 130,000\nCarryover 20,000\n(8) Carryover to 1963. The carryover to this year is $3,000, computed as follows:\nNet operating loss $150,000\nLess:\nTaxable 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\nTaxable income for 1956 (a year in which a net operating loss was sustained) 0\nTaxable 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\nTaxable 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\nTaxable 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\nTaxable 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\nTaxable income for 1962 (computed without the deduction of the carryover from 1958) 17,000\n———— 147,000\nCarryover 3,000\n(d) Determination of net operating 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 net operating loss deduction in the following manner:\nTaxable year Carryover Carryback Net operating loss deduction\nFrom 1956 From 1958 From 1956 From 1958\n1954 $0 $0 $75,000 $0 $75,000\n1955 0 0 60,000 150,000 210,000\n1957 30,000 0 0 150,000 180,000\n1959 10,000 150,000 0 0 160,000\n1960 0 130,000 0 0 130,000\n1961 0 95,000 0 0 95,000\n1962 0 20,000 0 0 20,000\n1963 0 3,000 0 0 3,000","path":["Title 26—Internal Revenue","CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY","SUBCHAPTER A—INCOME TAX","PART 1—INCOME TAXES"],"source_url":"https://www.ecfr.gov/api/versioner/v1/full/2026-08-25/title-26.xml","current_through":"2026-08-25","vintage":"","retrieved_at":"2026-08-27T02:25:11Z","sha256":"82209e911fefcbe03528128c10e5468685aeb0d8c218ac619cb31add6dbd2d15","source_id":"us-cfr","stale":true,"prev":"us/26-cfr-1.172-5","next":"us/26-cfr-1.172-7"},"notice":"GroundRules: Original legal text. Not legal advice."}