Looking for a Irs Publications? Download it for free!

•

The overall limit on itemized deductions.

2. Figure your spouse’s total tax as though

NOL of $5,000. They carry the NOL back to

your spouse had also filed as married filing

2008, a year in which Mark and Nancy filed

•

The phaseout of the deduction for exemp-

separately.

separate returns. Figured separately, Nancy’s

tions.

2010 deductions were more than her income,

3. Add the amounts in (1) and (2).

•

and Mark’s income was more than his deduc-

Qualified motor vehicle tax.

4. Divide the amount in (1) by the amount in

tions. Mark does not have any NOL to carry

back. Nancy can carry back the entire $5,000

(3).

Do not refigure the itemized deduction

NOL to her 2008 separate return.

5. Multiply the refigured tax on your joint re-

for charitable contributions.

turn by the amount figured in (4). This is

Example 2. Assume the same facts as in

CAUTION

your share of the joint tax liability.

Example

1, except that both Mark and Nancy

had deductions in 2010 that were more than

Finally, use your refigured taxable income

Figuring your contribution toward tax

their income. Figured separately, his NOL is

(Form 1045, line 15, using the “After carryback”

paid. Unless you have an agreement or clear

$1,800 and her NOL is $3,000. The sum of their

column) to refigure your total tax liability.

evidence of each spouse’s contributions toward

separate NOLs ($4,800) is less than their

the payment of the joint tax liability, figure your

Refigure your income tax, your alternative mini-

$5,000 joint NOL because his deductions in-

contribution by adding the tax withheld on your

mum tax, and any credits that are based on, or

cluded a $200 net capital loss that is not allowed

wages and your share of joint estimated tax

limited to, the amount of tax. (On Form 1045,

in figuring his separate NOL. The loss is allowed

payments or tax paid with the return. If the origi-

use lines 16 through 25, and the “After car-

in figuring their joint NOL because it was offset

nal return for the carryback year resulted in an

ryback” column.) The earned income credit, for

by Nancy’s capital gains. Mark’s share of their

overpayment, reduce your contribution by your

example, may be affected by changes to ad-

$5,000 joint NOL is $1,875 ($5,000 × $1,800/

share of the tax refund. Figure your share of a

justed gross income or the amount of tax (or

$4,800) and Nancy’s is $3,125 ($5,000 −

joint payment or refund by the same method

both) and, therefore, must be recomputed. If you

$1,875).

used in figuring your share of the joint tax liabil-

become eligible for a credit because of the car-

Joint return in previous carryback or car-

ity. Use your taxable income as originally re-

ryback, complete the form for that specific credit

ryforward year. If only one spouse had an

ported on the joint return in steps (1) and (2)

(such as the EIC Worksheet) for that year.

NOL deduction on the previous year’s joint re-

above, and substitute the joint payment or re-

While it is necessary to refigure your income

turn, all of the joint carryover is that spouse’s

fund for the refigured joint tax in step (5).

tax, alternative minimum tax, and credits, do not

carryover. If both spouses had an NOL deduc-

refigure your self-employment tax.

Change in Filing Status

tion (including separate carryovers of a joint

NOL, figured as explained in the

previous dis-

Deducting a Carryforward

cussion), figure each spouse’s share of the joint

If you and your spouse were married and filed a

carryover through the following steps.

joint return for each year involved in figuring

If you carry forward your NOL to a tax year after

NOL carrybacks and carryovers, figure the NOL

1. Figure each spouse’s modified taxable in-

the NOL year, list your NOL deduction as a

deduction on a joint return as you would for an

come as if he or she filed a separate re-

negative figure on the Other income line of Form

individual. However, treat the NOL deduction as

turn. See

Modified taxable income

under

1040 or Form 1040NR (line 21 for 2010). Es-

a joint NOL.

How To Figure an NOL

Carryover, later.

tates and trusts include an NOL deduction on

If you and your spouse were married and

Form 1041 with other deductions not subject to

filed separate returns for each year involved in

2. Multiply the joint modified taxable income

figuring NOL carrybacks and carryovers, the

the 2% limit (line 15a for 2010).

you used to figure the joint carryover by a

spouse who sustained the loss may take the

fraction, the numerator of which is spouse

You must attach a statement that shows all

NOL deduction on a separate return.

A’s modified taxable income figured in (1)

the important facts about the NOL. Your state-

Special rules apply for figuring the NOL car-

and the denominator of which is the total of

ment should include a computation showing

rybacks and carryovers of married people

the spouses’ modified taxable incomes fig-

how you figured the NOL deduction. If you de-

whose filing status changes for any tax year

ured in (1). This is spouse A’s share of the

duct more than one NOL in the same year, your

involved in figuring an NOL carryback or carry-

joint modified taxable income.

statement must cover each of them.

over.

3. Subtract the amount figured in (2) from the

Change in Marital Status

joint modified taxable income. This is

Separate to joint return. If you and your

spouse B’s share of the joint modified tax-

spouse file a joint return for a carryback or car-

able income.

If you and your spouse were not married to each

ryforward year, and were married but filed sepa-

other in all years involved in figuring NOL car-

rate returns for any of the tax years involved in

4. Reduce the amount figured in (3), but not

rybacks and carryovers, only the spouse who

figuring the NOL carryback or carryover, treat

below zero, by spouse B’s NOL deduction.

had the loss can take the NOL deduction. If you

the separate carryback or carryover as a joint

5. Add the amounts figured in (2) and (4).

file a joint return, the NOL deduction is limited to

carryback or carryover.

the income of that spouse.

6. Subtract the amount figured in (5) from

Joint to separate returns. If you and your

For example, if your marital status changes

spouse A’s NOL deduction. This is spouse

spouse file separate returns for a carryback or

because of death or divorce, and in a later year

A’s share of the joint carryover. The rest of

carryforward year, but filed a joint return for any

you have an NOL, you can carry back that loss

the joint carryover is spouse B’s share.

or all of the tax years involved in figuring the

only to the part of the income reported on the

NOL carryover, figure each of your carryovers

joint return (filed with your former spouse) that

Example. Sam and Wanda filed a joint re-

separately.

was related to your taxable income. After you

turn for 2008 and separate returns for 2009 and

deduct the NOL in the carryback year, the joint

Joint return in NOL year. Figure each

2010. In 2010, Sam had an NOL of $18,000 and

rates apply to the resulting taxable income.

spouse’s share of the joint NOL through the

Wanda had an NOL of $2,000. They choose to

following steps.

carry back both NOLs 2 years to their 2008 joint

Refund limit. If you are not married in the NOL

return and claim a $20,000 NOL deduction.

1. Figure each spouse’s NOL as if he or she

year (or are married to a different spouse), and

Their joint modified taxable income (MTI) for

filed a separate return. See

How To Figure

in the carryback year you were married and filed

2008 is $15,000, and their joint NOL carryover to

NOL, earlier. If only one spouse has an

a joint return, your refund for the overpaid joint

2009 is $5,000 ($20,000 – $15,000). Sam and

NOL, stop here. All of the joint NOL is that

tax may be limited. You can claim a refund for

Wanda each figure their separate MTI for 2008

spouse’s NOL.

the difference between your share of the

as if they had filed separate returns. Then they

2. If both spouses have an NOL, multiply the

refigured tax and your contribution toward the

figure their shares of the $5,000 carryover as

joint NOL by a fraction, the numerator of

tax paid on the joint return. The refund cannot be

follows.

which is spouse A’s NOL figured in (1) and

more than the joint overpayment. Attach a state-

the denominator of which is the total of the

ment showing how you figured your refund.

spouses’ NOLs figured in (1). The result is

Step 1.

Figuring your share of a joint tax liability.

spouse A’s share of the joint NOL. The

Sam’s separate MTI . . . . . . . . . .

$9,000

There are five steps for figuring your share of the

rest of the joint NOL is spouse B’s share.

Wanda’s separate MTI . . . . . . . .

+ 3,000

refigured joint tax liability.

Total MTI . . . . . . . . . . . . . . . . .

$12,000

1. Figure your total tax as though you had

Example 1. Mark and Nancy are married

Step 2.

filed as married filing separately.

and file a joint return for 2010. They have an

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

$15,000

Publication 536 (2010)

Page 9

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2010 Page 9

Related Articles

Related forms

Related Categories