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● loss on the sale of an accounts receivable (if you use

Business capital losses. You can deduct your business

an accrual method of accounting)

capital losses (line 11) up to only the total of:

● interest and litigation expenses on state and federal

● your nonbusiness capital gains that are more than the

income taxes related to your business

total of your nonbusiness capital losses and excess

nonbusiness deductions (line 10), and

● unrecovered investment in a pension or annuity

● your total business capital gains without regard to any

claimed on a decedent’s final return

section 1202 exclusion (line 12).

When determining the portion of deductible expenses

attributable to income from your trade or business, multiply

Line 24 – NOLs from other years. You cannot deduct any

the expenses by the ratio of your net income from the trade

of your NOL carryovers or carrybacks from other years.

or business to your Montana adjusted gross income.

Enter the total amount of your NOL deduction for losses

from other years.

When determining the portion of federal tax attributable to

income from your trade or business, multiply the federal tax

Carryback Election

by the ratio of your net business income to your Montana

adjusted gross income for the year the federal tax was

Generally, if you have an NOL for a tax year ending in

incurred.

2014, you have to carry back the entire amount of the

NOL to the two tax years before your NOL year (this is

Line 7 – Nonbusiness Income. Enter only your income

called the carryback period), and then carry forward any

that is not related to your trade or business or your

of your remaining NOL for up to 20 years after your NOL

employment. Examples of nonbusiness income include:

year (this is called the carryforward period). However, you

● Montana additions and subtractions that are considered

can choose not to carry back your NOL and only carry

nonbusiness

it forward. You cannot deduct any part of your NOL that

● interest and dividend income

remains after the 20-year carryforward period.

● taxable federal and state income tax refunds

NOL year. This is the year in which your NOL occurred.

● alimony received

Exceptions to Two-Year Carryback Rule

● gains from the sale of a personal residence to the

You can qualify for a longer carryback period if you have

extent recognized in the federal adjusted gross income

eligible losses or farming losses.

● gains or losses from the sale of assets not used in a

Eligible loss. The carryback period for eligible losses is

trade or business

three years. You have an eligible loss if any part of your

● taxable IRA distributions, pensions and annuities

NOL is:

● from a casualty or theft, or

● unemployment compensation

● attributable to a presidentially declared disaster for a

● taxable social security benefits

qualified small business.

● income or losses from a trust or estate

Qualified Small Business

● your share of nonbusiness income from partnerships

and S corporations

You have a qualified small business if you are a sole

proprietorship or a partnership that has average annual

Do not include on line 7 the income you received from your

gross receipts (reduced by returns and allowances) of $5

trade or business or your employment. Business income

million or less during a three-year period ending with the

includes, but is not limited to, your salaries and wages, self-

tax year of your NOL. If your business did not exist for the

employment income, rental income, your share of business

entire three-year period, use the period your business was

income from partnerships and S corporations, and ordinary

in existence.

gain(s) from the sale or other disposition of business real

Farming Business

estate or depreciable business property.

Line 17 – Adjustment for Section 1202 Exclusion. Enter

When you have a farming loss, your carryback period is

any gain you excluded under section 1202 on the sale or

five years. Your farming loss is the smaller of:

exchange of qualified small business stock.

● the amount that would be the NOL for the tax year if

only the income and deductions attributable to your

Line 19 through Line 22 – Adjustments for Capital

farming businesses were taken into account, or

Losses. Your amount deductible for capital losses is limited

based on whether these losses are business capital losses

● the NOL for the tax year.

or nonbusiness capital losses.

You have a farming business if your trade or business

Nonbusiness capital losses. You can deduct your

involves one or more of the following:

nonbusiness capital losses (line 2) up to only the amount of

● cultivating land

your nonbusiness capital gains without taking into account

● raising or harvesting any agricultural or horticultural

any section 1202 exclusion (line 3). If your nonbusiness

commodity

capital losses are more than your nonbusiness capital

gains without taking into account any section 1202

● operating a nursery or sod farm

exclusion, you cannot deduct the excess.

Montana Form Nol Instructions - Montana Net Operating Loss (Nol) And Federal Nol - 2014 Page 2

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