Questions and Answers
Net Operating Farm Losses
Corporate Income Tax; Individual Income Tax
Questions and answers concerning the carryback of net operating farm losses.
Office of Policy & Research
Questions and Answers Concerning
The Carryback of Net Operating Farm Losses
Does Kansas law allow a net operating farm loss be carried back? If so, when must the loss be incurred to be eligible for carryback treatment?
Yes, Kansas law does allow a net operating farm loss to be carried back. The controlling statute, K.S.A. 79-32,143, provides that a net operating farm loss incurred in taxable years beginning after December 31, 1999, may be carried back.
What is the carry back period for a net operating farm loss?
The carry back period established under K.S.A. 79-32,143 is determined by reference to subsection (i) of section 172 of the federal internal revenue code. The normal carry back period for a net operating farm loss is five years.
Some IRS publications say that you can choose to treat a farming loss as if it were not a farming loss, and thereby choose a two year carryback period instead of five years. To make this choice the taxpayer is advised to attach a statement to their federal return that they are choosing to treat any farming losses as if they were not farming losses under section 172(i)(3) of the Internal Revenue Code. If a taxpayer chooses to treat their farm loss as a regular net operating loss for federal purposes will the two-year carryback period election also be valid for Kansas income tax purposes?
Yes. Kansas income tax laws operate “in conformity” with federal income tax laws, unless there is a specific variation. K.S.A. 79-32,143 provides that, “. . . . a net operating [farm] loss deduction shall be allowed in the same manner that it is allowed under the federal internal revenue code.” As a result, when a taxpayer elects to use the two year regular net operating loss carryback period for the farm loss for federal purposes, Kansas will recognize the shorter carryback period.
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