NOL preservation ledger¶
Purpose: CEO-level planning tool for the $3,429,659 federal NOL carryforward generated on Austin's 2024 personal return. Tracks opening balance, expected absorption events, preservation strategies, and forecast burn under base/bull/bear scenarios. The optimization is NOT "reduce current tax" (already zero) — it's "preserve the NOL into high-income years."
Status: v1, 2026-05-10. Provisional figures pending Pearce confirmation of state character + multi-year stacking analysis.
Cross-references:
tax/2025-filing-prep.mdfor Pearce's working agenda (NOL is item 4);tax/advisory-tax-benefit-areas.mdfor the A-F categories;accounting/accounting-policy.md§22 for multiple- basis-types posture;accounting/entity-tax-classification-matrix.mdfor entity-level tax treatments that interact.
Opening balance¶
| Field | Value | Confidence | Source |
|---|---|---|---|
| Federal NOL carryforward (Austin's 2024 personal return) | $3,429,659 | [P] Provisional | 2024 1040 per Pearce; refresh w/ Pearce at 2025 working session |
| State character (NOL deductibility by state) | TBD | [U] Unknown | Pearce to confirm — Texas (no individual income tax), Alabama (state-level NOL rules apply for any AL-source income), Tennessee (no individual income tax), other states with K-1 / RE income |
| Carryforward period limitation | Indefinite (per TCJA §172, post-2017 NOLs carry forward indefinitely but limited to 80% of taxable income in any year) | [F] Final | TCJA §172 |
| Opening date | 2024-12-31 (close of 2024 tax year) | [F] Final | 1040 |
Refresh quarterly. When Pearce closes the 2025 working session, also confirm state-NOL character.
Expected absorption / burn events¶
These are the 1040 events likely to consume NOL. Listed by likely chronological order; refresh with each Pearce session.
2026 tax year (filing Apr/Oct 2027)¶
| Event | Direction | Estimated effect | Confidence | Sources |
|---|---|---|---|---|
| Mita Garden Hills 1009 rental income (full year on GK side) | NOL +consume | Net rental income TBD pending ABS Q1-Q3 + Q4 deliverables; minor at 1% asset utilization | [P] | accounting/mita-purchase-price-reconciliation.md |
| Mita depreciation deduction (US 5471 side) | NOL -reduce consumption (or generate further loss) | Significant; ~¥835M building basis (post Land/Building split) at 30-yr ADS = ~¥27.8M/yr depreciation deduction = ~$190K USD-equiv at 145 JPY/USD; subject to PFIC posture | [P] | Mita basis allocation + depreciation start-date pending Pearce + ABS |
| Casa Moksha 2026 operating loss (RHG side, US 5471 / Subpart F) | NOL -reduce consumption | Per signed multi-year FS, RHG runs at MX-tax NOL — accumulated 5.85M MXN through 2025; 2026 likely similar | [P] | source-data/jme/2026-05-08/ |
| Five Points BHM operating losses (1006 commercial rental, pre-LOI) | NOL -reduce consumption | Property tax + R&M + Edgewood passthrough; minor pre-revenue | [P] | accounting/five-points-1006-sba-narrative.md |
| Five Points BHM rental income (post-TRC LOI) | NOL +consume | TBD; depends on LOI execution + tenant move-in date | [U] | TRC LOI in flight |
| Renfroe Innovation patent prosecution costs | NOL -reduce consumption (if disregarded) OR capitalized at C-corp level (if 8832 elected) | Variable based on §174 capitalization vs deduction posture (TCJA §174 amortization rules apply to R&D) | [U] | accounting/renfroe-innovation-ip-register.md |
| W 3101 Holdings rental income | NOL +consume | Current rent — Schedule E reported on Austin's 1040 via disregarded SMLLC | [F] | W 3101 lease |
| Marina sublicense revenue (ATX Marine + Renfroe Marine) | NOL +consume | Modest; per slip leases | [F] | Marina sublicense docs |
| §165(g) Red Farm worthless-security deduction | NOL +consume / reduce | ~$120K loss; timing decision (2025 vs 2026 tax year) is open per tax/2025-filing-prep.md |
[P] | Pearce to confirm |
| Augusta rule rental income (W 3603 → RENFROE, ≤14 days) | NOL +consume | ~$21K/yr if executed; needs the agreement template + meeting documentation per legal/legal-document-inventory.md |
[P] | Pending Augusta-rule setup |
2027+ tax years¶
| Event | Direction | Confidence | Notes |
|---|---|---|---|
| STR loophole election on Casa Moksha (if Avg Stay ≤7 days + material participation) | NOL +consume (Schedule E losses become non-passive, stack against ordinary income) | [U] | Pearce + JME to evaluate; gating dependency on contemporaneous material-participation hour log |
| Cost-segregation study on Casa Moksha | NOL +consume (accelerates depreciation deductions) | [U] | Marginal at single-property scale; Pearce advisability call |
| Cost-segregation study on Mita Garden Hills | NOL +consume (accelerates depreciation deductions) | [U] | Marginal at single-condo scale; needs Pearce + ABS coordination |
| LP/VC fund liquidity events (capital gains stacking against NOL) | NOL +consume (large discrete events) | [U] | LP-transfer-into-RFH decision is open per investments/investment-register.md; if transferred, NOL absorption simplifies; if held personally, separate Schedule D/§1248 analysis |
| Mita Garden Hills disposition (if sold) | NOL +consume (gain on sale) | [U] | Long-hold thesis; not currently planned |
| 1006 building disposition | NOL +consume (gain on sale) | [U] | Long-hold thesis |
| Roth conversion event (if planned) | NOL +consume | [U] | Not currently planned |
| W 3603 sale or §1031 exchange | NOL +consume | [U] | Primary residence — §121 $250K/$500K exclusion applies first |
Preservation strategies¶
Tier 1 — already in place / decided¶
- Treat all 2025 + 2026 routine income as NOL-absorbed (NOL > expected income; no $0 in tax)
- Maintain disregarded-stack treatment for US LLCs (intercompany flows = capital contributions, no synthetic gains)
- AFR loans from parents are real loans (not capital contributions) — preserves the AFR-interest-deduction shield against future income
- Gross-up agent commissions on Casa Moksha (don't net) — preserves the deduction
Tier 2 — pending advisor confirmation¶
- Mita 5471 / depreciation strategy: straight-line 30-yr ADS vs accelerated; bonus depreciation eligibility (if any)
- 8832 election strategy on existing GK: retroactive election with reasonable cause if 75-day window missed → changes 5471 treatment to 8858 disregarded
- 8832 election on proposed second GK (only relevant IF formation executes) — same question
- Mita land/building basis allocation: maximize building basis (depreciable) vs land (non-depreciable)
- STR loophole on Casa Moksha: requires Avg Stay ≤7 days + material participation hour log (not currently maintained)
- Cost-segregation study on Mita (if accelerating depreciation makes sense at single-condo scale)
- Cost-segregation on Casa Moksha (if accelerating CM-side depreciation makes sense given the JME Acreedor framing)
- Renfroe Innovation §174 R&D capitalization vs deduction: TCJA §174 changes affect treatment of patent prosecution costs
- PFIC analysis on existing GK: if rental ≠ trade-or-business, default punitive PFIC rules apply, accelerating gain recognition
Tier 3 — strategic / not yet in scope¶
- Multi-year forecast under base / bull / bear scenarios (Phase 7 of
accounting/xero-buildout.md) - LP-interest transfer into RFH: pending Pearce basis-step-up vs carryover analysis
- Section 1031 like-kind-exchange planning for any RE disposition
Scenario forecast (provisional, refresh quarterly)¶
Base case¶
- 2026 net 1040 income (consolidated): TBD pending Phase 5 first proper monthly close
- Estimated 2026 NOL utilization: $50-150K (modest passive income, mostly W 3101 + marine + Augusta + Mita rental net of depreciation)
- Remaining NOL after 2026: ~$3.28-3.38M
- Year of full NOL absorption (under base case): 2032+ assuming no major liquidity event
Bull case (LP liquidity event lands; Casa Moksha STR-eligible; 1006 leased at full ask)¶
- 2026 net 1040 income: $500K-$2M+
- Estimated 2026 NOL utilization: $400K-$1.6M
- Remaining NOL: ~$1.8-3.0M
- Year of full absorption: 2027-2030
Bear case (current run-rate; Mita rental marginal; Five Points pre-LOI; no LP exits; no STR)¶
- 2026 net 1040 income: ≈$0 (NOL coverage)
- Estimated 2026 NOL utilization: $0-50K
- Remaining NOL: ~$3.38-3.43M
- Year of full absorption: indefinite (NOL preserved indefinitely per TCJA §172)
Discipline rules¶
- Document every NOL-touching event in this ledger before it happens — proactive, not reactive.
- Coordinate timing of discretionary NOL events (cost-seg, §165(g) Red Farm, LP transfers) to maximize stacking.
- No advisor-gated tax position is acted on until Pearce confirms.
- Refresh this ledger quarterly at each Pearce working session.
Last updated: 2026-05-10. Refresh quarterly minimum.