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Illustrated Form 1045

Sam’s MTI ÷ total MTI

Martha refigures her taxable income for 2008

($9,000 ÷ $12,000) . . . . . . . . . . .

× .75

after carrying back her 2010 NOL as follows:

Sam’s share of joint MTI . . . . . . .

$11,250

The following example illustrates how to use

2008 Adjusted gross income . . .

$50,000

Form 1045 to claim an NOL deduction in a

Step 3.

Less:

carryback year. It includes a filled-in page 1 of

Joint MTI . . . . . . . . . . . . . . . . .

$15,000

−10,000

NOL from 2010 . . . . . . . . . . . .

− 11,250

Form 1045.

Sam’s share of joint MTI . . . . . . .

2008 Adjusted gross income after

Wanda’s share of joint MTI . . . . .

$3,750

carryback . . . . . . . . . . . . . . . .

$40,000

E x a m p l e .

M a r t h a

S a n d e r s

i s

Step 4.

Less:

self-employed contractor. Martha’s 2010 deduc-

Wanda’s share of joint MTI . . . . .

$3,750

Itemized deductions:

tions are more than her 2010 income because of

− 2,000

Wanda’s NOL deduction . . . . . . .

Medical expenses

a business loss. She uses Form 1045 to carry

Wanda’s remaining share . . . . . .

$1,750

[$6,000 − ($40,000

back her NOL 2 years and claim an NOL deduc-

× 7.5%)] . . . . . . .

$3,000

Step 5.

tion in 2008. Her filing status in both years was

State income tax . .

+ 2,000

Sam’s share of joint MTI . . . . . . .

$11,250

single. See the filled-in Form 1045 on page 11.

Real estate tax . . .

+ 4,000

Wanda’s remaining share . . . . . .

+ 1,750

Martha figures her 2010 NOL on Form 1045,

Home mortgage

Joint MTI to be offset . . . . . . . . .

$13,000

Schedule A (not shown). (For an example using

interest . . . . . . . .

+ 5,000

Step 6.

−14,000

Form 1045, Schedule A, see

Illustrated Form

Total itemized deductions . . . .

Sam’s NOL deduction . . . . . . . . .

$18,000

Less:

1045, Schedule A

under

How To Figure an

NOL,

− 13,000

Joint MTI to be offset . . . . . . . . .

− 3,500

Exemption . . . . . . . . . . . . . . .

earlier.) She enters the $10,000 NOL from Form

Sam’s carryover to 2009 . . . . . . .

$5,000

2008 Taxable income after

1045, Schedule A, line 25, on Form 1045, line

carryback . . . . . . . . . . . . . . . .

$22,500

1a.

Joint carryover to 2009 . . . . . . . .

$5,000

Martha completes lines 10 through 25, using

− 5,000

Sam’s carryover . . . . . . . . . . . .

Martha then completes lines 10 through 25,

the “Before carryback” column under the column

Wanda’s carryover to 2009 . . . . .

$-0-

using the “After carryback” column under the

for the second preceding tax year ended 12/31/

column for the second preceding tax year ended

Wanda’s $2,000 NOL deduction offsets

08 on page 1 of Form 1045 using the following

12/31/08. On line 10, Martha enters her $10,000

$2,000 of her $3,750 share of the joint modified

amounts from her 2008 return.

NOL deduction. Her new adjusted gross income

taxable income and is completely used up. She

on line 11 is $40,000 ($50,000 − $10,000). To

has no carryover to 2008. Sam’s $18,000 NOL

2008 Adjusted gross income . . .

$50,000

complete line 12, she must refigure her medical

deduction offsets all of his $11,250 share of joint

expense deduction using her new adjusted

Itemized deductions:

modified taxable income and the remaining

gross income. Her refigured medical expense

Medical expenses

$1,750 of Wanda’s share. His carryover to 2008

[$6,000 − ($50,000

deduction is $3,000 [$6,000 − ($40,000 ×

is $5,000.

× 7.5%)] . . . . . . .

$2,250

7.5%)]. This increases her total itemized deduc-

State income tax . .

+ 2,000

tions to $14,000 [$13,250 + ($3,000 − $2,250)].

Real estate tax . . .

+ 4,000

Martha uses her refigured taxable income

Home mortgage

($22,500) from line 15, and the tax tables in her

interest . . . . . . . .

+ 5,000

2008 Form 1040 instructions to find her income

tax. She enters the new amount, $2,978, on line

Total itemized deductions . . . .

$13,250

16, and her new total tax liability, $9,098, on line

Exemption . . . . . . . . . . . . . . .

$3,500

25.

Martha used up her $10,000 NOL in 2008 so

Income tax . . . . . . . . . . . . . . .

$4,663

she does not complete a column for the first

Self-employment tax . . . . . . . . .

$6,120

preceding tax year ended 12/31/2009. The de-

crease in tax because of her NOL deduction

(line 27) is $1,655.

Martha files Form 1045 after filing her 2010

return, but no later than January 2, 2012. She

mails it to the Internal Revenue Service Center

for the place where she lives as shown in the

2010 instructions for Form 1040 and attaches a

copy of her 2010 return (including the applicable

forms and schedules).

Publication 536 (2010)

Page 10

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2010 Page 10

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