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Form 1045 Schedule A Line 7 Non-Business Income
Line 7 is another one of those calculations, that only the I.R.S. could figure out how to make incomprehensible. So we need another table, where BR means "business related" (or other) and NBR means "not business related". Since our goal here is simply to add up the NBR income, we're gonna fudge a bit on what is BR exactly, since it's not material to our current purpose. Maybe the I.R.S. should just call this "not NOL-related income".
So you add up your amounts that are in the NBR column above, and enter that amount here on Line 7.
That's right. Line 8 should be called "Actual Net Non-business Capital Gain and Gross Income". In other words, this number, Line 8, represents what you actually made in all of your non-business activity without regard to I.R.S. exclusions and limitations on what you can report. It is the more real number if you will. But before deductions, which we will get to next, and without yet taking into account any non-business capital loss. (Do you ever get the feeling you're being led by the nose through a labyrinth?)
The remainder of this article, which covers the rest of the form, through line 25, may be purchased for five dollars at this Google Checkout link. Upon payment, you will immediately receive an automatic email reply, with the instructions for exactly where to go and what to do, to read the remainder of this article.
Or you may call me through Keen
<-- Back to Calculating Your Net Operating Loss (Page Four)
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
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This article should be cited as:
"Net Operating Loss Carryforward : Calculating Your Net Operating Loss (Page Five)" by Will Johnson, wjhonson@aol.com at knol.google.com Creative Commons Attribution 3.0 License
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Form 1045 Schedule A Line 7 Non-Business Income
Line 7 is another one of those calculations, that only the I.R.S. could figure out how to make incomprehensible. So we need another table, where BR means "business related" (or other) and NBR means "not business related". Since our goal here is simply to add up the NBR income, we're gonna fudge a bit on what is BR exactly, since it's not material to our current purpose. Maybe the I.R.S. should just call this "not NOL-related income".| Form 1040 line-item | Line Item Description | BR | NBR |
| 7 | Wages, salaries, tips | X | |
| 8 | Taxable interest | X | |
| 9 | Ordinary dividends | X | |
| 10 | Taxable refunds, etc | X | |
| 11 | Alimony received | X | |
| 12 | Business income or loss | X | |
| 13 | Capital gain or loss | X | |
| 14 | Other gains or loss | X | |
| 15 | IRA distributions | X | |
| 16 | Pensions and annuities | X | |
| 17 | Rental real estate, etc | X | |
| 18 | Farm income or loss | X | |
| 19 | Unemployment compensation | X | |
| 20 | Social security benefits | X | |
| 21 | Other income | X |
So you add up your amounts that are in the NBR column above, and enter that amount here on Line 7.
Form 1045 Schedule A Line 8
Remember that we've already decided to name Line 5 as "Actual Realized Net Non-business Capital Gain". Now since Line 7 is "Non-business income other than capital gains", then when we are instructed to "add lines 5 and 7" can you guess what this new Line 8 should be called?That's right. Line 8 should be called "Actual Net Non-business Capital Gain and Gross Income". In other words, this number, Line 8, represents what you actually made in all of your non-business activity without regard to I.R.S. exclusions and limitations on what you can report. It is the more real number if you will. But before deductions, which we will get to next, and without yet taking into account any non-business capital loss. (Do you ever get the feeling you're being led by the nose through a labyrinth?)
The remainder of this article, which covers the rest of the form, through line 25, may be purchased for five dollars at this Google Checkout link. Upon payment, you will immediately receive an automatic email reply, with the instructions for exactly where to go and what to do, to read the remainder of this article.
Or you may call me through Keen
<-- Back to Calculating Your Net Operating Loss (Page Four)
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
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Excellent! $5 Really Well Spent. Followup Questions not covered... please advise!
Have struggled with understanding if can carryforward one or more NOL's each year, for past 4 yrs every October! (As have become more forgetful... aging "gracefully", then forget to follow-up until next tax season!) Your article does a fantastic job of explaining how to determine if have an NOL or not, stepping through the complexities of form 1045. Well done! However, did not explain what happens next, if multiple NOL's in a row, or if no taxes due for other reasons, as to what is required when filing one's schedule C & 1040. So, requesting clarification of how to apply the NOL in current or future years, specific to a string of years where no taxes are due due to offsetting deductions, while still accumulating business NOL's those years. OK... here's the scenario. NOL in each of 4 recent yrs ('07-'10). 24 yr old business had been successful previously. Carryforward investment losses from '08 stock crash, classic bad timing of buying high, then selling near the '08 lows. (Then, shorting in '09 & '10 after initial run-ups, only to see things inexplicably go quite higher....) Dividend income covered portion of family expenses these yrs., balance of expenses paid from savings of years when business did well. Also, principal repayment of large loan had made to childhood friend provided cashflow without tax obligation. (May take a few more yrs until principal all paid back, after which becomes taxable income.) Personal deductions (substantial medical, property taxes, some donations, etc.) and family exemptions offset dividend and misc. income these years. Did not file 1045, as seemed overwhelmingly complex, especially at last minute. (Learned this yr. Turbotax can opt to waive carryback of 2010 NOL, so elected this option.) Completing taxes today and tomorrow, hopefully! Was fully audited in '08 to confirm no taxes due, as had family expenses and deductions, yet little income that yr. to offset. Apparently computers flagged to confirm no missing income and determine how expenses were being paid for. Audit went quite well... a pleasant experience, even... perhaps one of the lucky few! (Guess had always wondered if was doing things correctly with Turbotax, so nice to have that confirmed.) A few minor adjustments, some in either direction that more-or-less offset. Oh, also had a typo in investment losses, so nice to learn losses, though substantial, not quite as bad as first thought. Auditor suggested to save time, to let go of business vehicle deductions for that year only, as without still no taxes due. Otherwise, would take significant time & effort to further substantiate and another day to review. Reluctantly, since had thorough gas and milage logs, elected that option, after being assured would in no way reflect had tried to claim something that should not have, but simply elected that as an audit time-saver for both Uncle Sam and myself. Back to the questions... In this scenario, must one list prior, accumulating NOL balances each year in "other income"? In other words, when no tax liability without applying NOL, is it still required to list past NOL's, to help IRS be aware of and/or track? Or, say even ten years from now, upon determining tax is due that year, list one or more NOL's in other income for that future year, having not listed any NOL's the prior nine? If audited, then provide schedule C & 1045 calculations of year(s) with NOL's, up to 20 yrs. old? Did not see the NOL carryforward election option in prior years with TurboTax... something newly implemented? Since no tax due, had thought no reason to list NOL's anywhere past few years. Thought if had listed prior year's NOL's, might "use them up" without reason, simply making that tax year substantially more negative. If no tax due this year without applying '07-'09 NOL's, will these NOL's still be fully available to carryforward in future years? Or, must one itemize prior yr. NOL's, making taxe liability even "more negative"? If so, does one simply list each yr NOL itemized under other income? Does one loose the NOL of prior yr(s) if did not list in one or more years as a substantial negative, under other income, even if no taxes due that yr? Or, does listing NOL total to date, make that year's return even more negative; i.e. "use it up"? Basically, can I simply keep my records of NOL each yr; then, when a future year (in upcoming 20) has taxes due, then list one or more of the old NOL's then, using up in chronological order? The latter is what had thought to do, but each year wondered if by not filing 1045, would I inadvertantly give up option to carryforwrd the NOL for that and previous years? As close to retirement, anticipate shifting remaining liquid assets into more dividend paying investments, which may will result in future taxes due. As boys turn 18 and enter college, exemptions will disappear & medical expenses may be less, fewer deductions resulting in possible taxable income from dividends then. When interest rates rise, may also...
Anonymous - 14 Oct 2011