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Carryover Contributions AND Effect of NOL Carryovers On

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    Carryover Contributions AND Effect of NOL Carryovers On

    Looking for input/confirmation on 2 separate calculations.

    Providing background information in order to follow.

    Specific questions/concerns pertain to tax year 2013 and 2014 and estimates/planning for tax year 2015.

    (1) Carryover Contributions:

    Tax Year 2011
    Taxpayer contributed $13,000 to 50% organizations, but due to AGI limitations was only able to deduct $5,000. Leaving an excess charitable contribution of $8,000 to be carried over to 2012.

    Tax Year 2012
    Taxpayer contributed $1,000 to 50% organizations.
    For tax year 2012, there is the $1,000 in current year contributions and the $8,000 of carryover from tax year 2011.
    Due to AGI limitations was only able to deduct the current year's contribution of $1,000 plus $4,000 of the $8,000 carryover contributions.
    This leaves $4,000 from 2011 to carryover to tax year 2013.

    Tax Year 2013
    Taxpayer contributed $1,000 to 50% organizations.
    Due to negative AGI, taxpayer had no deduction.
    Took the standard deduction of $6,200 on 2013 tax return.

    Carryover $1,000 2013 contribution plus the remaining $4,000 from 2011 to tax year 2014. If I read the following part of the Regulation correctly, this can be done? Reg. 1.170A-10(a)(2) --"The carryover provisions apply with respect to contributions made during a taxable year in excess of the applicable percentage limitation even though the taxpayer elects under section 144 to take the standard deduction in that year instead of itemizing the deduction allowable in computing taxable income for that year." Also, it is my understanding that this reg. only applies to taxpayer's who are already carrying over contributions due to previous year's AGI limitations. Not to taxpayer's who have been taking the standard deduction.

    (2) Effect of NOL Carryovers on carryover of excess contributions

    Tax Year 2013
    Taxpayer had an NOL of $1,000. Elected not to carryback.

    Tax Year 2014
    Taxpayer contributes $8,000 to 50% organizations. Still has $4,000 carryover from 2011.
    Due to negative AGI, taxpayer has no deduction. Negative AGI resulted from Schedule C business loss of $8,000 and Line 21, NOL of $1,000 (carried from 2013)

    Per Reg. 1.170A-10(d) contribution deductions disallowed due to NOL carryover are added to unused NOL as additional NOL and no longer treated as contributions. However, the taxpayer's AGI would have still been negative even without the NOL which would have limited the taxpayer's charitable contributions to $0. Given that, do I still reduce the amount of the taxpayer's carryover contributions by the $1,000 NOL leaving $7,000 carryover from 2014 and the remaining $4,000 from 2011 to carryover to tax year 2015?

    Appreciate any input.

    Grace

    #2
    Wow, you are making my brain hurt. :-)


    I agree with your first part, but disagree with the second. I think the full $8,000 is considered as a charitable carryover.

    Your cited Regulation says the charitable carryover "must be reduced by the amount by which such excess reduces taxable income (for purposes of determining the portion of a net operating loss which shall be carried to taxable years succeeding the contribution year under the second sentence of section 172(b)(2)) and increases the net operating loss which is carried to a succeeding taxable year."

    The way I interpret it is that the current-year charitable contribution would not "reduce taxable income" [because it would be disallowed for negative AGI] if there wasn't a carryover NOL, so none of it is converted into the NOL.

    Comment


      #3
      On another note, if this taxpayer has any money in IRA or SEP IRA accounts, is it possible they are missing an opportunity to do some no-cost/low-cost Roth conversions?
      "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

      Comment


        #4
        Thank You

        Originally posted by JohnH View Post
        On another note, if this taxpayer has any money in IRA or SEP IRA accounts, is it possible they are missing an opportunity to do some no-cost/low-cost Roth conversions?


        Yes, working on that for 2015 and/or 2016 after I get squared away with these computations and see what I have to work with.

        Comment


          #5
          Thank You

          Originally posted by TaxGuyBill View Post
          Wow, you are making my brain hurt. :-) .

          My brain is already dead from working on this on and off for several days.

          Comment

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