My client is a small C-Corporation (two shareholders) that started doing business in 2010. Up until 2014 tax year, all years were resulting in losses and therefore they generated NOLs for three consecutive years. Unfortunately an election to forego the carryback period was never made on all three of those returns. I am concerned that the IRS may disallow carryforward because the election was not made. It looks like 2014 may result in a profit and the corporation will now need an NOL deduction to offset any potential tax consequences.

Here are my questions...

Will carryforward to 2014 be disallowed by the IRS even though there was no taxable income in any of the prior, "carryback" years? Would be wise to preemptively amend 2012 tax year (which is still within the statute of
limitation) just to "record" that there is no "benefit" of doing so
and then carry it forward to each subsequent year (2013 and then finally 2014) just to play it safe?

Please help!