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$500,000 NOL


Edsel

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Never had one that big before, but sure enough, I'm having to deal with one now.

Does anyone have a filled-in example, including Sch. A and Sch. B?  Neither the instructions nor Pub 536 give explicit direction on how to enter the sense (plus or minus) on many of the line items.

Examples such as what I request are not abundant.  But if anyone can share one, I'll appreciate it.

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Links to illustrated 1045 for an individual, plus see additional information with links that may be accessed at the left of that page: http://irszilla.com/net-operating-losses-nols-individuals-estates-trusts/illustrated-form-1045.htm

If using Drake, this KB also has some information and how to input depending on the years involved: https://kb.drakesoftware.com/Site/Browse/10863/1040-Net-Operating-Loss-FAQs

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14 hours ago, jklcpa said:

Links to illustrated 1045 for an individual, plus see additional information with links that may be accessed at the left of that page: http://irszilla.com/net-operating-losses-nols-individuals-estates-trusts/illustrated-form-1045.htm

If using Drake, this KB also has some information and how to input depending on the years involved: https://kb.drakesoftware.com/Site/Browse/10863/1040-Net-Operating-Loss-FAQs

Judy, how do you know all this stuff??  If I tried to learn all this my brain would explode from overload.

Thanks, Edsel

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OK, please let me get down to specifics.  None of the research material presented to me, nor the instructions, nor Pub 536, tell me how to enter the sense (+ or -) of the line items on Schedule A.  For example:

  • Sch A Line 1 Net Operating Loss     Enter as a positive or negative?
  • Sch A Line 3 Nonbusiness Capital Gains   Enter as a positive or negative?
  • Sch A Line 6 Nonbusiness deductions  Enter as a positive or negative?
  • Sch A Line 7 Nonbusiness income other than capital gains  Enter as a positive or negative?
  • Sch A Line 12 Business capital gains without regard to §1202  Enter as a positive or negative?
  • Sch A Line 16 Sch D, line 16, loss   Enter as a positive or negative?
  • Sch A Line 23 DPAD Deduction.  Enter as a positive or negative?
  • Sch B Line 3 Net Capital Loss Deduction.  Enter as a positive or negative?
  • Sch B Line 5 DPAD again.  Enter as a positive or negative?
  • Sch B Line 6 Adjustments to AGI.  Enter as a positive or negative?
  • Sch B Line 7 Adjustments to Itemized Deductions.  Enter as a positive or negative?
  • Sch B Line 8 Personal Exemptions.  Enter as a positive or negative?  (I believe positive on this one)

I realize I'm admitting my own ignorance here, but nowhere in the instructions nor pub does it disclose how to enter these.

I was looking forward to seeing an example from Judy's link, but it has a blind link that doesn't work in my browser.  The Drake link tells me how to navigate but nowhere does it answer the questions above, and Drake is inconsistent from one year to the next.  One of these sources was gracious enough to tell me Sch A Line 25 must result in a negative.

Thanks in advance to anyone willing to immerse themselves in the questions above.

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With the exception of Sch A, line 1, everything you've listed will be entered as a positive number.  Some of this is in the instructions, some of it printed on the form itself within the lines' descriptions.

  • Sch A Line 1 Net Operating Loss    This is the amount from the 1040, line 41. Enter it exactly as it appears on that line of the 1040. If it's negative on the 1040, enter it as negative on this line.
  • Sch A Line 3 Nonbusiness Capital Gains  - positive
  • Sch A Line 6 Nonbusiness deductions - positive
  • Sch A Line 7 Nonbusiness income other than capital gains  - positive
  • Sch A Line 12 Business capital gains without regard to §1202 -  positive
  • Sch A Line 16 Sch D, line 16, loss   - Positive, if there is a loss on that line of Sch D.umber.If you don’t have a loss on that line (and don't have a sec 1202 exclusion, skip lines 16 through 21 and enter the amount from line 15 on line 22
  • Sch A Line 23 DPAD Deduction.  Positive.
  • Sch B Line 3 Net Capital Loss Deduction.  Positive
  • Sch B Line 5 DPAD again.  Positive
  • Sch B Line 6 Adjustments to AGI.  Positive
  • Sch B Line 7 Adjustments to Itemized Deductions.  positive
  • Sch B Line 8 Personal Exemptions.  (I believe positive on this one)  Yes, positive
54 minutes ago, Edsel said:

Sch A Line 25 must result in a negative.

Correct, the purpose of the 1045 Sch A is to actually calculate the NOL, using the 1040, line 41 as its starting point and adjust for all of the items that aren't considered NOL.  If line 25 is positive, then there isn't an NOL. 

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You must also include a second 1045 and all related schedules and calculations using the AMT methods and rules even if AMT didn't apply because of being under threshold.  I've seen these NOL carryback returns kicked back for that very reason.  I hope you aren't doing this by hand.

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1 hour ago, Edsel said:

Judy, how do you know all this stuff??  If I tried to learn all this my brain would explode from overload.

Thanks, Edsel

You're welcome.

I was lucky enough to have spent my early years in a small CPA firm having a diverse client base where I worked on a wide variety of projects. The owner was a perfectionist when it came to the work product, and he gave me the guidance and leeway to learn. He's gone now and I miss him, but his training and expectations still resonate. 

And... Google. 😄

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Thank you so much Judy.  I have Drake, but the numbers aren't flowing because of taxpayer identity.  I'm having to populate 2013, 2014, 2015, and 2016 in Drake although they were prepared by someone else.  Some returns list the husband first, others list the wife, plus the husband died during the time interval.  Very complicated returns, prepared by 2 CPA firms and a tax lawyer.  Now ME.

Thank you for specific answers.

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My sympathies, @Edsel!  Those complications just make it all worse.  

First time I did an NOL/1045 I did it three times with the same info and came up with three different answers (on ATX).  Finally did it by myself, on paper, and then strong-armed the software to come up with *that* result (because I knew how it calculated, I decided that one was right - it had the other advantage that the result almost matched one of the three by computer).  Then I took motrin and had myself a lie-down for a while, to deal with the massive headache.  

Either I've gotten more used to them, or Drake makes them easier.  Maybe both!

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On 9/5/2018 at 1:38 AM, jklcpa said:

I hope you aren't doing this by hand.

Ha!  Guess what?

Drake is inconsistent from 2013 to ultimately 2018, and technical support can't deal with it.

So yes - a pen and ink returns, no fewer than 5 of them.

Catherine and DanRVan:  You'll be deliriously happy to know this.  Yes, I am required to know what I'm doing, inside and out, during the process.

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