Nol

[S.I.S.]

To Brad Imadahl:
I have looked in the Tax Book on the Business Deductions and read but don't quick understand some things about it.
I have a new client that has a NOL on his return from last year of $1568. Can you explain in more details what this is all about? (the carry back/carry forward rules)?
Of all my clients his is the only one with this on it.
Thank you very much Mr. Imadahl (or anyone that knows).

[JG EA]

As a reader of

...TheTaxBook may I say that not every tax law, code, letter, etc. can be in TTB. Perhaps this is an area where TTB alerts you to the issue, provides you with publication number to do further reseach. (For instance Pub 536.)

NOL have many, many rules and each situation is so different.

[Bees Knees]

Did you read the info in TTB, page 8-16 under "How to Use an NOL." ??

It says: "Once the NOL has been calculated for the year, it is used to offset income from another tax year. The default is to carry the NOL back two years. If the NOL is not used up in that year, it is carried forward to the following year. If not used up in that year, it continues to be carried forward, until it is used up...."

A few paragraphs later it says: "Where to enter the NOL in a carry back or carry forward year. An NOL is always entered as a negative number on the other income line, Form 1040 (line 21 for 2005). An NOL carry back or carry forward cannot be used to increase an NOL for the carry back or carry forward year. It also does not affect the SE tax calculation for a carry back or carry forward year."

TTB then has a heading called "How to Calculate an NOL Carry Forward."

The paragraph explains some basics, but then it says "Use Schedule B, Form 1045 as a worksheet to calculate the unused NOL, even if Form 1045 is not being used to carry the initial NOL back."

Schedule B, in Form 1045 is a step by step way of figuring the amount of NOL generated in one year, that is then carried back or forward to another year. I suggest you use that worksheet to calculate the amount from the previous year that can be carried forward to your 2005 return.

If this doesn't answer your question, please be more specific as to what you do not understand about an NOL carry back or carry forward.

[S.I.S.]

Did you read the info in TTB, page 8-16 under "How to Use an NOL." ??

It says: "Once the NOL has been calculated for the year, it is used to offset income from another tax year. The default is to carry the NOL back two years. If the NOL is not used up in that year, it is carried forward to the following year. If not used up in that year, it continues to be carried forward, until it is used up...."

A few paragraphs later it says: "Where to enter the NOL in a carry back or carry forward year. An NOL is always entered as a negative number on the other income line, Form 1040 (line 21 for 2005). An NOL carry back or carry forward cannot be used to increase an NOL for the carry back or carry forward year. It also does not affect the SE tax calculation for a carry back or carry forward year."

TTB then has a heading called "How to Calculate an NOL Carry Forward."

The paragraph explains some basics, but then it says "Use Schedule B, Form 1045 as a worksheet to calculate the unused NOL, even if Form 1045 is not being used to carry the initial NOL back."

Schedule B, in Form 1045 is a step by step way of figuring the amount of NOL generated in one year, that is then carried back or forward to another year. I suggest you use that worksheet to calculate the amount from the previous year that can be carried forward to your 2005 return.

If this doesn't answer your question, please be more specific as to what you do not understand about an NOL carry back or carry forward.

Thank you very much. This does clear things up on this matter. He is the only one I have had so far and this has help me understand better. It was on other income as a negative. Thanks again.