Application for Tentative Refund

Purpose of Form

Form 1045 is used by an individual, estate, or trust to apply for a quick tax refund resulting from:

• The carryback of a net operating loss (NOL),
• The carryback of an unused general business credit,
• The carryback of a net section 1256 contracts loss,
• An overpayment of tax due to a claim of right adjustment under section 1341(b)(1), or
• A suspended research credit allowed for the current year.

Waiving the carryback period. You may elect to carry an NOL forward only, instead of first carrying it back. To make this election for an NOL incurred in your 2001 tax year, attach to your 2001 tax return filed on or before the due date (including extensions) a statement that you are electing under section 172(b)(3) to relinquish the entire carryback period for any 2001 NOL. If you filed your return on time without making the election, you may still make the election on an amended return filed within 6 months of the due date of the return (excluding extensions). Attach the election to the amended return, and write Filed pursuant to section 301.9100-2 on the election statement. File the amended return at the same address you used for your original return. Once made, the election is irrevocable.

Definitions

Eligible loss. For an individual, an eligible loss is any loss of property arising from fire, storm, shipwreck, other casualty, or theft.

For a small business (as defined in section 172(b)(1)(F)(iii)), an eligible loss is any loss attributable to a Presidentially declared disaster (as defined in section 1033(h)(3)).

A farming loss is not an eligible loss.

Farming loss. A farming loss is the smaller of:

• The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses (as defined in section 263A(e)(4)) were taken into account or
• The NOL for the tax year.

Specified liability loss. Generally, a specified liability loss is a loss arising from:

• Product liability or
• An act (or failure to act) that occurred at least 3 years before the beginning of the loss year and resulted in a liability under a Federal or state law requiring:

1. Reclamation of land,
2. Dismantling of a drilling platform,
3. Remediation of environmental contamination, or
4. Payment under any workers compensation act.

Any loss from a liability arising from 1 through 4 above may be taken into account as a specified liability loss only if you used an accrual method of accounting throughout the period in which the act (or failure to act) occurred. For details, see section 172(f).

When To File

Generally, you must file Form 1045 within 1 year after the end of the year in which an NOL, unused credit, a net section 1256 contracts loss or claim of right adjustment arose.

Exception. For a suspended research credit allowed for the current year or any carryback of a suspended research credit, you must file Form 1045:

• After the end of the suspension period to which the credit relates (for example, after September 30, 2001, for a credit attributable to the second suspension period) and
• Before the date that is 1 year after the end of that suspension period.

Be sure to file your 2001 income tax return no later than the date you file Form 1045.

If you carry back any portion of an NOL or an unused general business credit to tax years before the 3 years preceding the 2001 tax year, you may need to use additional Form(s) 1045. On any additional Form(s) 1045, skip lines 1 through 9 and Schedule A.

Where To File

File Form 1045 with the Internal Revenue Service Center for the place where you live as shown in the instructions for your 2001 income tax return.

Do not mail Form 1045 with your 2001 income tax return.

What To Attach

Attach copies of the following, if applicable, to Form 1045 for the year of the loss or credit:

• If you are an individual, pages 1 and 2 of your 2001 Form 1040 and Schedules A, D, and J (Form 1040), if applicable.
• All Schedules K-1 you received from partnerships, S corporations, estates, or trusts that contribute to the carryback.
• Any application for extension of time to file your 2001 income tax return.
• All Forms 8271, Investor Reporting of Tax Shelter Registration Number, attached to your 2001 income tax return.
• Any Form 6765, Credit for Increasing Research Activities, or Form 3800, General Business Credit, used to figure any suspended research credit allowed for the current year.
• Forms 8302, Direct Deposit of Tax Refund of $1 Million or More.
• All other forms and schedules from which a carryback results, such as Schedule C or F (Form 1040), Form 3800, or Form 8586, Low-Income Housing Credit.
• All forms or schedules for items refigured in the carryback years, such as Form 6251, Alternative Minimum Tax - Individuals, or Form 8586.

You must attach copies of all required forms listed above, and complete all lines on Form 1045 that apply to you. Otherwise, your application may be disallowed.

Processing the Application

The IRS will process your application within 90 days from the later of:

• The date you file the complete application or
• The last day of the month that includes the due date (including extensions) for filing your 2001 income tax return (or, for a claim of right adjustment, the date of the overpayment under section 1341(b)(1)).

The processing of Form 1045 and the payment of the requested refund does not mean the IRS has accepted your application as correct. If the IRS later determines that the claimed deductions or credits are due to an overstatement of the value of property, negligence, disregard of rules, or substantial understatement of income tax, you may have to pay penalties. Any additional tax also will generate interest compounded daily.

The IRS may need to contact you or your authorized representative (for example, your accountant or tax return preparer) for more information so we can process your application. If you want to designate a representative for us to contact, attach a copy of your authorization to Form 1045. For this purpose, you may use Form 2848, Power of Attorney and Declaration of Representative.

Disallowance of the Application

Your application is not treated as a claim for credit or refund. It may be disallowed if it has material omissions or math errors that are not corrected within the 90-day period. If the application is disallowed in whole or in part, no suit challenging the disallowance may be brought in any court. But you may file a regular claim for credit or refund before the limitation period expires, as explained below under Form 1040X or Other Amended Return.

Excessive Allowances

Any amount applied, credited, or refunded based on this application that the IRS later determines to be excessive may be billed as if it were due to a math or clerical error on the return.

Form 1040X or Other Amended Return

Individuals may get a refund by filing Form 1040X, Amended U.S. Individual Income Tax Return, instead of Form 1045. An estate or trust may file an amended Form 1041, U.S. Income Tax Return for Estates and Trusts. Generally, you must file an amended return no later than 3 years after the due date of the return for the applicable tax year.

If you use Form 1040X or other amended return, follow the instructions for that return. Attach to the amended return a copy of Schedule A of Form 1045 showing the computation of the NOL and, if applicable, a copy of Schedule B of Form 1045 showing the computation of the NOL carryover. Complete a separate Form 1040X or other amended return for each year for which you request an adjustment.

The procedures for Form 1040X and Form 1045 are different. The IRS is not required to process your Form 1040X within 90 days. However, if we do not process it within 6 months from the date you file it, you may file suit in court. If the IRS disallows your claim on Form 1040X and you disagree with that determination, you must file suit no later than 2 years after the date we disallow it.

Additional Information

For more details on NOLs, see Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.

Address

P.O. box. Enter your box number only if your post office does not deliver mail to your street address.

Foreign address. Enter the information in the following order: City, province or state, and country. Follow the country's practice for entering the postal code. Do not abbreviate the country name.

Line 1b - Unused General Business Credit

If you claim a tentative refund based on the carryback of an unused general business credit, attach a detailed computation showing how you figured the credit carryback and a recomputation of the credit after you apply the carryback. Make the recomputation on Form 3800 (or Form 8844, Empowerment Zone Employment Credit, if applicable) for the tax year of the tentative allowance.

If you filed a joint return (or separate return) for some but not all of the tax years involved in figuring the unused credit carryback, special rules apply to figuring the carryback. See the Instructions for Form 3800.

Line 1c - Net Section 1256 Contracts Loss

You may elect to carryback a net section 1256 contracts loss to each of the 3 tax years preceding the loss year. To make the election, check box D at the top of Form 6781, Gains and Losses From Section 1256 Contracts and Straddles. The amount which may be used in any prior tax year cannot exceed the net section 1256 contract gain in that year and may not increase or create an NOL for that year. Reflect the carryback as a reduction to your adjusted gross income in the After carryback column on line 10. Attach to Form 1045 a copy of Form 6781 for the year of the net section 1256 contracts loss and an amended Form 6781 for each carryback year. For more details, see section 1212(c).

Line 9

If an NOL or net section 1256 contracts loss carryback eliminates or reduces a prior year foreign tax credit, you may not use Form 1045 to carry the released foreign tax credits to earlier years. Also, if the released foreign tax credits result in the release of general business credits, you may not use Form 1045 to carry the released general business credits to earlier years. Instead, you must file Form 1040X or other amended return to claim refunds for those years. For details, see Rev. Rul. 82-154, 1982-2 C.B. 394.

Lines 10 Through 28 - Computation of Decrease in Tax

Use one pair of columns to enter amounts before and after carryback for each year to which the loss is being carried. Start with the earliest carryback year. A net section 1256 contracts loss can be carried back 3 years. See the instructions for line 11 on this page to figure the tax years to which you may carry an NOL. Use the remaining pairs of columns for each consecutive preceding tax year until the loss is fully absorbed. Enter the ordinal number of years the loss is being carried back and the date the carryback year ends in the spaces provided in the headings above line 10 for each pair of columns.

Example. Your tax year is the 2001 calendar year and you are carrying an NOL back 2 years. You enter 2nd and 12/31/99 in the left column heading in the spaces provided. The column heading now reads 2nd preceding tax year ended 12/31/99.

For each carryback year, enter in the column labeled Before carryback the amounts for the carryback year as shown on your original or amended return. If the amounts were previously adjusted by you or the IRS, enter the amounts after adjustment.

Computation of income, deductions, and credits when an NOL is fully absorbed or a net section 1256 contracts loss is carried back. To refigure your tax for the year in which an NOL is fully absorbed, refigure any income, deductions, and credits based on or limited to a percentage of your adjusted gross income. Use your adjusted gross income determined after you apply the NOL or net section 1256 contracts loss carryback. Amounts to refigure include:

• The special allowance for passive activity losses from rental real estate activities.
• Taxable social security benefits.
• IRA deductions.
• The student loan interest deduction.
• Excludable savings bond interest.
• The exclusion of amounts received under an employer's adoption assistance program.
• Medical expenses.
• Personal casualty and theft losses.
• Miscellaneous deductions subject to the 2% limit.
• Itemized deductions subject to the overall limit of section 68.
• The phaseout of the deduction for personal exemptions.
• The credit for child and dependent care expenses.
• The credit for the elderly or the disabled.
• Education credits.
• The child tax credit.
• The adoption credit.
• The District of Columbia first-time homebuyer credit.

However, refigure your charitable contributions deduction without regard to any NOL carryback.

Any credits based on or limited by the tax must be refigured using your tax liability determined after you apply the NOL or net section 1256 contracts loss carryback.

If you have an NOL, see Pub. 536 for more information and examples.

Line 11 - NOL Deduction After Carryback

Use the following rules to figure the tax years to which you must carry an NOL shown on Schedule A, line 27. If an NOL is not fully absorbed in a year to which it is carried, complete Schedule B to figure the amount to carry to the next carryback year.

General rule. You generally must carry back the entire NOL to the 2nd tax year before the loss year. Any loss not used in the 2nd preceding year is then carried to the 1st preceding year. Any loss not applied in the 2 preceding years may be carried forward up to 20 years.

Eligible losses. To the extent an NOL is an eligible loss (defined on page 1), it is carried back to the 3rd tax year before the loss. Any loss not used in that year is carried to the 2nd and then the 1st preceding year. Any eligible loss not applied in the 3 preceding years may be carried forward up to 20 years.

Only the eligible loss portion of an NOL may be carried back 3 years.

Example. You have a $20,000 NOL of which only $5,000 is an eligible loss. The $5,000 eligible loss is carried back 3 years, but the remaining $15,000 loss is carried back only 2 years, although you had modified taxable income of more than $5,000 in the 3rd preceding year.

Farming losses. To the extent an NOL is a farming loss (defined on page 1), it is carried back to the 5th tax year before the loss. Any farming loss not used in that year is carried to the 4th preceding year and then applied consecutively forward through the 1st preceding year. Any farming loss not applied in the 5 preceding years may be carried forward up to 20 years.

Note: You may need to use two Forms 1045 to carry back a farming loss. Complete lines 1 through 9 and Schedule A on only one Form 1045. Use this Form 1045 for the earliest preceding tax years. You must sign this Form 1045, but do not need to sign the other Form 1045.

Only the farming loss portion of an NOL may be carried back 5 years.

Example. You operate a farming business and incur an NOL of $50,000 for 2001. $25,000 of the NOL is attributable to income and deductions of your farming business; $10,000 is attributable to a fire in your personal residence (an eligible loss); and the remaining $15,000 is attributable to your spouse's work as an employee. The $25,000 farming loss is carried back 5 years; the $10,000 eligible loss is carried back 3 years; and the remaining $15,000 loss is carried back 2 years. Any unused portion of this NOL may be carried forward up to 20 years.

For a farming loss, you may elect a loss carryback period of 2 years instead of 5 years. To make this election for 2001, attach to your 2001 income tax return filed on or before the due date (including extensions) a statement that you are electing a 2 year carryback period for any 2001 farming losses. If you filed your original return on time, you may make the election on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach the election to the amended return, and write Filed pursuant to section 301.9100-2 on the election statement. File the amended return at the same address you used for your original return. Once made, the election is irrevocable.

Specified liability losses. To the extent an NOL is a specified liability loss (defined on page 1), it is carried back to the 10th tax year before the loss. Any loss not used in that year is carried to the 9th preceding year and then applied consecutively forward through the 1st preceding year. Any specified liability loss that is not applied in the 10 preceding years may be carried forward up to 20 years.

Note: You may need to use up to four Forms 1045 to carry back a specified liability loss. Complete lines 1 through 9 and Schedule A on only one Form 1045. Use this Form 1045 for the earliest preceding tax years. You must sign this Form 1045, but do not need to sign the other Form(s) 1045.

You may elect to treat a specified liability loss as if it were not a specified liability loss. If you make this election, the loss carryback period will be 2 years (3 years if the loss is an eligible loss; 5 years if the loss is a farming loss). To make this election for 2001, attach to your 2001 income tax return filed on or before the due date (including extensions) a statement that you are electing to treat any 2001 specified liability losses as if they were not specified liability losses. If you filed your original return on time, you may make the election on an amended return filed within 6 months after the due date of the return (excluding extensions). Attach the election to the amended return, and write Filed pursuant to section 301.9100-2 on the election statement. File the amended return at the same address you used for your original return. Once made, the election is irrevocable.

Special rules. Special rules apply if you filed a joint return (or a separate return) for some but not all of the tax years involved in figuring an NOL carryback. For details, see Pub. 536. Attach a computation showing how you figured the carryback.

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