Instructions For Form 1045 (Rev. February 2006)

•

Your share of business income

Estates and trusts. Enter as a

Line 6—Nonbusiness

from a partnership or an S

positive number the amount, if any,

Deductions

corporation.

shown (or as previously adjusted) on

Enter as a positive number

Schedule D (Form 1041), line 16, for

For more details on business and

deductions that are not connected

2004 –2005 (line 17 for 1997 –2003;

nonbusiness income and deductions,

with a trade or business. They

line 18 for 1995 – 1996).

see Pub. 536.

include:

•

IRA deductions,

Line 4—Section 1202

Line 17—Section 1202

•

Health savings account deduction,

Exclusion

•

Archer MSA deduction,

Enter as a positive number any gain

•

Enter as a positive number any gain

Deductions for payments on behalf

excluded under section 1202 on the

of a self-employed individual to a

sale or exchange of qualified small

SEP, SIMPLE, or qualified plan,

business stock.

•

Alimony paid,

•

Most itemized deductions (except

Schedule B—NOL

Line 5—Adjustments to

for state income tax on business

Adjusted Gross Income

Carryover

profits, casualty and theft losses, and

If you entered an amount on line 3 or

any employee business expenses),

Complete and file this schedule to

line 4, you must refigure certain

and

determine the NOL deduction for

•

income and deductions based on

The standard deduction.

each carryback year and the amount

adjusted gross income. These

to be carried forward, if not fully

Do not enter business deductions

include:

absorbed.

•

on line 6. These are deductions that

The special allowance for passive

If an NOL is more than the

are connected with a trade or

activity losses from rental real estate

modified taxable income for the

business. They include:

activities,

•

earliest year to which it is carried, you

Taxable social security benefits,

State income tax on business

•

must file Schedule B to figure the

IRA deductions,

profits,

•

amount of the NOL to be carried to

Excludable savings bond interest,

Educator expenses,

•

the next tax year. The amount of the

The exclusion of amounts received

Moving expenses,

•

carryover is the excess, if any, of the

under an employer’s adoption

The deduction for one-half of

NOL carryback over the modified

assistance program,

self-employment tax,

•

taxable income for that earlier year.

The student loan interest

Domestic production activities

Modified taxable income is the

deduction, and

deduction,

•

amount figured on line 8 of

•

The tuition and fees deduction.

Rental losses,

Schedule B.

•

Loss on the sale or exchange of

For purposes of figuring the

If you carry two or more NOLs

business real estate or depreciable

adjustment to each of these items,

to a tax year, figure your

property,

your adjusted gross income is

•

modified taxable income by

Your share of a business loss from

increased by the total of the amounts

CAUTION

deducting the NOLs in the order in

a partnership or an S corporation,

on line 3 and line 4. Do not take into

•

which they were incurred. First,

Ordinary loss on the sale or

account any NOL carryback from

deduct the NOL from the earliest

exchange of section 1244 (small

2005 or later.

year, then the NOL from the next

business) stock,

•

Generally, figure the adjustment to

earliest year, etc. After you deduct

Ordinary loss on the sale or

each item of income or deduction in

each NOL, there will be a new,

exchange of stock in a small business

the order listed above and, when

smaller, modified taxable income to

investment company operating under

figuring the adjustment to each

compare to any remaining NOL.

the Small Business Investment Act of

subsequent item, increase or

1958,

Make the same entries in each

•

decrease adjusted gross income by

Loss from the sale of accounts

column heading as on page 1 of

the total adjustments you figured for

receivable if such accounts arose

Form 1045 (see the instructions for

the previous items. However, a

under the accrual method of

Lines 10 Through 27 on page 3).

special rule applies if you received

accounting, and

social security benefits and deducted

•

Line 2

If you itemized your deductions,

IRA contributions. Use the

Do not take into account on this line

casualty and theft losses (even if they

worksheets in Pub. 590, Individual

any NOL carryback from 2005 or

involve nonbusiness property) and

Retirement Arrangements (IRAs), to

later. However, do take into account

employee business expenses (such

refigure your taxable social security

NOLs that occurred in tax years

as union dues, uniforms, tools, and

benefits and IRA deductions under

before 2005 and are otherwise

educational expenses).

the special rule.

allowable as carrybacks or

carryovers.

Line 7—Nonbusiness

Enter on line 5 the total

adjustments made to the listed items.

Note. If your taxable income is

Income Other Than Capital

Attach a computation showing how

shown as zero on your tax return (or

Gains

you figured the adjustments.

as previously adjusted) for any

Enter income that is not from a trade

carryback year, refigure it without

Line 6—Adjustment to

or business. Examples are ordinary

limiting the result to zero, and enter it

dividends, annuities, and interest on

Itemized Deductions

on line 2 as a negative number.

investments.

Individuals. Skip this line if, for the

Line 3—Net Capital Loss

Do not enter business income on

applicable carryback year:

Deduction

•

line 7. This is income from a trade or

You did not itemize deductions, or

•

business and includes:

Individuals. Enter as a positive

The amounts on Schedule B, line 3

•

Salaries and wages,

number the amount, if any, shown (or

and line 4, are zero.

•

Rental income,

as previously adjusted) on Schedule

Otherwise, complete lines 10 through

•

Gain on the sale or exchange of

D (Form 1040), line 21, for

34 and enter on line 6 the amount

business real estate or depreciable

2004 – 2005 (line 18 for 1997 –2003;

from line 34 (or, if applicable, line 12

property, and

line 19 for 1995 –1996).

of the worksheet on page 8).

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Instructions For Form 1045 (Rev. February 2006) - 2005 Page 6

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