New Jersey Taxation Division acquiesces to ruling on applicability of federal at-risk rules
The New Jersey Division of Taxation has announced its acquiescence to the September 3, 2020 ruling by the New Jersey Superior Court in Andrew J. Shechtel v. Director, Division of Taxation, 32 N.J. Tax 180 (App. Div. 2020) that, for New Jersey Gross Income Tax (NJ-GIT) purposes, taxpayers should follow the IRC Section 465 "at-risk" limitations, and are entitled to deduct losses in succeeding years once a taxpayer has sufficient basis to claim the suspended loss.
The Division of Taxation announced on its website that the Shechtel decision applies only to partners in partnerships and sole proprietors. The Division advises that the decision is not applicable to S corporation shareholders in view of N.J.S.A. 54A:5-12, which provides specific language limiting shareholders' losses. In addition, taxpayers may not use a loss following the "at-risk" rules if they have previously used the loss for NJ-GIT purposes.
The Division has advised taxpayers that are entitled to deduct suspended losses that were not previously claimed to file amended returns.
Mazars’ insight
An amended return must be filed within three years from the original due date of the return, or two years from the time the tax was paid, whichever is later.
Please contact your Mazars professional for additional information.
The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.
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