NOL Lost from C-Corp to S-Corp, in future year S-Corp is Revoked does the NOL get reinstated?

[janetc315]

I know that if the C-Corp had an NOL of $(88,000) when it converted to an S-Corp, the NOL can no longer be carried forward. What happens if 3 years later...the S-Corp decides to Revoke its S-Corp Status, can the NOL that originally existed be reinstated an used by the C-Corp? 

[M-MTax]

You posted in your other thread. Pretty sure the NOL is lost forever. I think maybe mike posted something in the other thread so maybe he'll post here.

[Mike9241]

reg 1.172-1

(f) Electing small business corporations. In determining the amount of the net operating loss deduction of any corporation, there shall be disregarded the net operating loss of such corporation for any taxable year for which such corporation was an electing small business corporation under subchapter S (section 1371 and following), chapter 1 of the Code. In applying section 172(b)(1) and (2) to a net operating loss sustained in a taxable year in which the corporation was not an electing small business corporation, a taxable year in which the corporation was an electing small business corporation is counted as a taxable year to which such net operating loss is carried back or over. However, the taxable income for such year as determined under section 172(b)(2) is treated as if it were zero for purposes of computing the balance of the loss available to the corporation as a carryback or carryover to other taxable years in which the corporation is not an electing small business corporation. See section 1374 and the regulations thereunder for allowance of a deduction to shareholders for a net operating loss sustained by an electing small business corporation.

what this is saying is you use up one year of the NnOL carryforward period for the C-Corp for each year the corporation was an S-Corp

[Rick19744]

In addition to what has been posted:

• As you stated, in general, C corporation NOL's cannot be used during the S election period
• An exception to this, is if the S corporation is subject to the BIG (built-in gains tax).
• If the S corporation is subject to the BIG, C corp net operating losses can be used to offset the built-in gain; which reduces any BIG tax.  IRC 1374(b)(2)
• Additionally, if the S status is lost or terminated in the middle of a tax year, the short S period and short C period is treated as one year; essentially the short S year is disregarded when determining carryover period years.  IRC 1362(e)(6)(A)