701—502.3(422) Capital loss carryback.
	502.3(1) Capital losses shall be allowed or allowable for Iowa corporation income tax purposes to the same extent they are allowed or allowable for federal corporation income tax purposes. Capital loss carrybacks shall be treated as an adjustment to federal taxable income to arrive at net allocable and apportionable income.
	a. 	For accrual-basis taxpayers the federal income tax refund shall not be accrued to the loss year but rather treated as a reduction in federal income tax paid in the carryback year.
	b. 	Cash-basis taxpayers shall include the federal income tax refund in Iowa taxable income in the year received.
	c. 	Where the taxpayer files a separate Iowa corporation income tax return but files as part of a federal consolidated income tax return, the portion of the federal refund due to a capital loss carryback attributable to the taxpayer shall be calculated by computing the federal tax deduction in the carryback year as follows:

Separate Company Income -	 	 	 	 	
Separate Company Capital	 	Consolidated	 	 	
Loss Carryback	×	Federal Tax	×	50%	
Sum of the Incomes of Profit	 	after Capital	 	 	
Companies - Sum of Separate	 	Loss Carryback	 	 	
Company Capital Loss	 	 	 	 	
Carrybacks to Profit	 	 	 	 	
Companies	 	 	 	 	
	502.3(2) When the carryback year has both allocable and apportionable capital gains, the capital loss carryback shall be applied pro rata on a percentage basis of the specific gain to the total gains.
Example: Assume a taxpayer has a 1973 capital loss carryback available of $2000. The loss would be applied in the following manner:

 	1970	1970	 	1970	 	
 	Total Capital Gain	Allocable Gain	 	Apportionable Gain	 	
 	$16,000	$4,000	 	$12,000	 	
 	 	 	 	 	 	
 	Allocable gain	–$4,000	 	 	 	
 	Total capital gain	–$16,000	=	¼ or 25% of carryback to allocable gain	 	
1970 allocable capital gain after application of loss carryback:	
$4,000 less ($2,000 × 25%) = $3,500 net allocable capital gain.	
This rule is intended to implement Iowa Code sections 422.35 and 422.37.
[Editorial change: IAC Supplement 11/2/22]