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§ 7.15 INDIVIDUALS’ NET OPERATING LOSS CARRYOVERS AND CARRYBACKSrule for net operating loss carryovers 114 in computing the excess charitable contributionsfor the contribution year.(a) Carryover RulesIn determining the amount of excess charitable contributions that must betreated as paid in each of the five years succeeding the contribution year, theexcess charitable contributions described above must be reduced by the amountby which the excess reduces taxable income (for purposes of determining theportion of a net operating loss that must be carried to tax years succeeding thecontribution year under the general rule concerning net operating loss carryovers).115 This increases the net operating loss carried to a succeeding tax year. Inreducing taxable income under these rules, an individual who has made charitablecontributions in the contribution year to public organizations and to othercharitable organizations must first deduct the contributions made to public charitableorganizations from his or her adjusted gross income, computed withoutregard to his or her net operating loss deduction, before any of the contributionsmade to other charitable organizations may be deducted from adjusted grossincome. Thus, if the excess of the contributions made in the contribution year topublic charitable organizations over the amount deductible in the contributionyear is utilized to reduce taxable income (under the general rules concerning netoperating loss carryovers) 116 for the year, thereby serving to increase the amountof the net operating loss carryover to a succeeding year or years, no part of theexcess charitable contributions made in the contribution year may be treated aspaid in any of the five immediately succeeding tax years. If only a portion of theexcess charitable contributions is so used, the excess charitable contributionsneed be reduced only to that extent. 117These rules may be illustrated by the following three examples:EXAMPLE 7.22B, for 2005, had adjusted gross income (computed without regard to any net operating lossdeduction) of $50,000. During that year, B made charitable contributions of money in theamount of $30,000, all of which were to public charitable organizations; B also had a netoperating loss carryover from 2004 of $50,000. In the absence of the net operating lossdeduction, B would have been allowed a deduction for charitable contributions of $25,000(50% of $50,000). After application of the net operating loss deduction, B was not allowed anydeduction for charitable contributions, and there was (before applying the special rule for netoperating loss carryovers) a tentative excess charitable contribution of $30,000. For purposes ofdetermining the net operating loss that remained to be carried over to 2006, B computed histaxable income for 2005 under the general rule concerning net operating loss carryovers bydeducting the $25,000 charitable contribution. After the $50,000 net operating loss carryoverwas applied against the $25,000 of taxable income for 2005 (computed in accordance withthis general rule, assuming no deductions other than the charitable contribution deduction wereapplicable in making the computation), there remained a $25,000 net operating loss carryover114IRC § 170(d)(1)(B).115IRC § 170(b)(2), second sentence.116Id.117Reg. § 1.170A-10(d)(1). 213