New 5-Year Carryback Rule for Net Operating Losses (NOLs)

If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). However, you can still choose to use the previous carryback period. You also can choose not to carry back an NOL and only carry it forward.

Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. The instructions for this form will be revised to reflect the new law.

Wash Sale Rules Do Not Apply to Section 1256 Contracts

The wash sale rules that generally apply to losses from the sale of stock or securities, do not apply to any loss arising from a section 1256 contract.

A section 1256 contract is any:

• Regulated futures contract,
• Foreign currency contract,
• Nonequity option,
• Dealer equity option, or
• Dealer securities futures contract.

Wash sales and section 1256 contracts are explained in detail in Publication 550, Investment Income and Expenses.

Other 2001 Changes

Other changes are discussed in the following chapters.

Chapter 4	Car Expenses
Chapter 5	Depreciation

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