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Homebuilder Loss Claim Crumbles

A homebuilder's assertion that its losses are related to "product liability" had no foundation in existing law, says the IRS.

March 8, 2010

Homebuilders recently scored a major tax victory by securing the ability to carry back certain losses — referred to as "applicable net operating losses (NOLs)" — for five years. Ordinarily, under the Internal Revenue Code — specifically, Section 172(b)(1)(A)(i) — an NOL can be carried back only two years preceding the taxable year in which the NOL was sustained.¹ However, some homebuilders were not satisfied with only a five-year carryback and sought to classify a portion of their NOLs as "product liability losses," which are eligible for a 10-year carryback. But this effort has been summarily rejected by the Internal Revenue Service in a chief counsel advice memorandum (CCA).² Read more...

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