Tax Type
Corporation Income Tax
Description
Net operating loss carryover
Topic
Computation of Income
Date Issued
06-10-1994
June 10, 1994
Re: Sec. 58.1-1821 Application; Corporate Income Taxes
Dear**************
This will respond to the amended return filed on November 19, 1993, and to the letters of May 6, 1992, and May 9, 1994, in which you have applied for a refund of corporate income taxes on behalf of****************** (the "Taxpayer") for the 1989 taxable year.
FACTS
The Taxpayer previously contested the amount of a 1985 net operating loss carryover to the 1987 and 1988 taxable years. Because the issue was decided in the Taxpayer's favor, the Taxpayer has requested that the proper carryover amount be carried to and adjusted in its 1989 amended return. The 1989 amended return was filed in order to report changes attributable to an IRS audit.
DETERMINATION
The department previously ruled that the Taxpayer's 1985 net operating loss would be adjusted. See Public Document (P.D.) 94-157 (5/23/94), copy attached. The Taxpayer requests that the adjustments to the 1986 net operating loss (which may be carried forward as result of P.D. 94-157) be allowed to reduce 1989 federal taxable income for Virginia purposes.
The item at issue is an element of the 1989 federal taxable income determined on a separate company basis, and the statute of limitation for amending the 1989 return had not expired at the time the Taxpayer requested the change affecting the 1985 and 1986 net operating losses. Accordingly, the corrected 1986 net operating loss carry over to 1989 shall be allowed.
In reviewing the 1989 amended return filed by the Taxpayer, the department discovered that certain adjustments will be required. Part of the changes arising from the 1989 IRS audit affected state income taxes. Accordingly, an adjustment to the Virginia addition for state income taxes is required. In addition, the Taxpayer claimed adjustments attributable to nonbusiness income. These adjustments have also been disallowed. See P.D. 94-58 (3/15/94), copy attached.
The 1989 amended return shall be adjusted as provided herein this letter, and as reflected on the attached schedules.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8075M
Rulings of the Tax Commissioner