Forgot to carry forward disallowed losses way back in time

[lexster333]

Not sure if I will present all info correctly but I'll try

Many years ago (2014/2015) we (myself and partner) invested in some R&D (pharma). Myself and partner and some investors put in approximately 1 million through our company - a partnership LLC. The research although great ended up in a legal fight for years (8  in fact) due to other researchers spending the money on something else. We sued and eventually reached a settlement in 2022 and got 600k back of the 1 million spent.

I had recorded my share of these bills in 2014 and 2015 as disallowed losses on my tax return. I didn't claim anything for them - they were just there for record. In 2016 I had to switch accountants and somehow they forgot to carry over these disallowed losses onto 2016 personal return and this is what has been carried over since. My current accountant is telling me I must pay my share of the profits (so 50% of 600K) even though I have made nothing (in fact I've lost money) as all that 600k went back to paying back the original investors. I hope there is a way around this as it seems unfair to me that I must pay a huge tax bill because something was not carried forward years ago and I legitimately have the correct business filings for each year.

[jtax]

I'm not sure you need to file anything to keep the carryforward from being effective. But even if you did, you could amend the needed returns to include that. Many people think you can't amend returns after 3 years (when the statute of limitations for refund requests usually expires), but that is only true if you're requesting a refund on the amended return. You can go back forever to correct a carryforward that changes an open year return.

I'd suggest you find another qualified advisor (a CPA, Enrolled Agent, or tax lawyer) for a second opinion. 

For more information search for "amending a closed tax year to correct nol carryforward" or something similar. 

I am not expressing an opinion on the investment partnership or the correctness of the NOLs you have carried forward but not "claimed" ...