Business Deductions
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- Should You Sell or Trade in Your Car?
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Need Some Deductions for 2011?
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Updated for 2011
Small Business Deductions: Business Losses vs NOLs
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Items that May Cause a Net Operating Loss
1) Business losses (this is one of the major causes)
2) Casualty and theft losses (these are treated as business losses for NOL purposes).
3) Rental property losses
4) Unreimbursed employee business expenses
5) Moving expenses (expenses of moving to a new job location).
6) Your share of a partnership or S-corporation operating loss.
7) Loss of the sale of small business investment company (SBIC) stock.
- A Small Business Investment Company is authorized to provide equity capital to small businesses.
- An investment in an SBIC is not the same as an investment in Section 1244 stock (small business stock)
- A loss on a short sale of SBIC stock is deductible as a capital loss.
8) Loss in Section 1244 stock (small business stock).
9) Deductions for personal exemptions (yours and your dependents).
10) Capital losses in excess of capital gains.
- A net nonbusiness capital loss may not be included in a net operating loss (e.g., a loss on securities you purchased for your personal investment portfolio).
- If nonbusiness capital losses exceed nonbusiness capital gains, the excess amount is used to reduce your loss on Schedule A of Form 1045.
11) Business capital losses:
- You may take into account business capital losses only up to the total of business capital gains plus any nonbusiness capital gains remaining after the adjustment for nonbusiness deductions.
12) The section 1202 exclusion of 50% of the gain from the sale or exchange of qualified small business stock.
13) Nonbusiness deductions in excess of nonbusiness income plus nonbusiness net capital gain.
- For example, the amount of the standard deduction that exceeds interest income on your personal money market account is excluded from the NOL calculation.
14) NOL carrybacks and carryovers from other years are excluded from NOL calculations.
15) An IRA deduction
16) A Self-employed person's contribution to a Keogh plan.
- Business losses are the most common cause of net operating losses.
Items Not Allowed in Figuring a Net Operating Loss
In general, nonbusiness deductions that exceed nonbusiness income may not be used in computing a net operating loss deduction.
However, nonbusiness casualty and theft losses, for NOL purposes, are treated as business losses, and therefore, may be included in computing a NOL.
The following items may NOT be used in figuring a NOL:
- Deductions for personal exemptions (yours and your dependents).
- Capital losses in excess of capital gains.
- A net nonbusiness capital loss may not be included in a net operating loss.
- If nonbusiness capital losses exceed nonbusiness capital gains, the excess amount is used to reduce your loss on Schedule A of Form 1045.
- Business capital losses:
- You may take into account business capital losses only up to the total of business capital gains plus any nonbusiness capital gains remaining after the adjustment for nonbusiness deductions.
- The section 1202 exclusion of 50% of the gain from the sale or exchange of qualified small business stock.
- Nonbusiness deductions in excess of nonbusiness income
plus nonbusiness net capital gain.
- For example, the amount of the standard deduction that exceeds interest income on your personal money market account is excluded from the NOL calculation.
- NOL carrybacks and carryovers from other years are excluded from NOL calculations.
- An IRA deduction
- A Self-employed person's contribution to a Keogh plan.
Next:
Business Losses and Net Operating Losses: Form 1045,Schedule A; Why a Separate Computation on Form 1045, Schedule A is Required to Figure a NOL; Deducting a Net Operating Loss
Related Links
- Who Can Claim an NOL?
- How Do You Know if You Have a NOL?
- Schedule A of Form 1045
- Why a Separate Computation is Required for a NOL
- Items That May Cause a NOL
- Items Not allowed in Figuring NOLs
- Deducting a NOL
- How to Carry Back a NOL
- Carryback and Carryforward Periods
- Eligible Loss and NOLs
- Waiving the Carryback Period
- Recalculating Your Tax Liability
- Marital Status and NOLs
- How to Claim a NOL Refund
- Example of Net Operating Loss Computation
Copyright © 2008-2012 Larry Villano. All rights reserved.