Instructions For Schedule J - Income Averaging For Farmers And Fishermen

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taxable income before subtracting exemp-

his Form 1040, line 38, was a negative

The 2002 Tax Rate Schedules on

tions shown on your 2003 Form 1040,

$1,000). John adds the $3,000 from Sched-

page J-5,

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line 38 (or as previously adjusted), was less

ule D, line 18, and the $5,000 carryover. He

The 2002 Capital Gain Tax Work-

than zero. Enter the amount by which your

reduces the result by the $7,000 loss on his

sheet on page J-5, or

2003 capital loss carryover to 2004 (the

Schedule D, line 17a, and enters $1,000 on

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The Schedule D you filed for 2002

sum of your short- and long-term capital

line 2 of the worksheet.

(but use the 2002 Tax Rate Schedules on

loss carryovers) exceeds the excess of the

page J-5 instead of the 2002 Tax Table

loss on your 2003 Schedule D, line 17a,

John enters -0- on line 3 of the work-

when figuring the tax on Schedule D,

over the loss on your 2003 Schedule D, line

sheet because he does not have an NOL for

lines 25 and 39, or on the Schedule D Tax

18.

2003 and did not have an NOL carryover

Worksheet, lines 15 and 36).

from 2003 available to carry to 2004 and

If you had an NOL for 2003, enter

Line 3.

later years. The NOLD for 2003 of $2,100

the amount of that NOL as figured on the

was reduced to zero because it did not ex-

2003 Form 1045, Schedule A, line 27, you

ceed his modified taxable income of

filed with Form 1045 or Form 1040X. If

$4,100. Modified taxable income is figured

you did not have an NOL for 2003, enter

Line 13

by adding back the $3,000 net capital loss

the portion, if any, of the NOL carryovers

deduction and the $3,050 of exemptions to

If you used Schedule J to figure your tax for

and carrybacks to 2003 that were not used

negative taxable income (figured without

2003 (that is, you entered the amount from

in 2003 and were carried to years after

regard to the NOLD) of $1,950. John enters

that Schedule J, line 22, on Form 1040,

2003.

$1,000 on line 4 and $3,050 on line 5. He

line 41, or on Form 1040X), enter on line

enters $3,050 as a negative amount on

Example. John Farmington did not use

13 the amount from that Schedule J, line 3.

Schedule J, line 13. He enters $6,000 on

income averaging for 2001, 2002, nor

If you did not use Schedule J to figure

Schedule J, line 14, and $2,950 on Sched-

2003. The taxable income before sub-

your tax for 2003, enter on line 13 the tax-

ule J, line 15. If he uses Schedule J to figure

tracting exemptions on his 2003

able income from your 2003 tax return (or

his tax for 2005, he will enter $2,950 on his

Form 1040, line 38, is a negative $1,000.

as previously adjusted by the IRS, an

2005 Schedule J as his 2003 taxable in-

This amount includes an NOL deduction

amended return, etc.). But if that amount is

(NOLD) on his 2003 Form 1040, line 21, of

come for income averaging purposes.

zero or less, complete the worksheet below

$2,100. The $2,100 is the portion of the

to figure the amount to enter on line 13.

2002 NOL that was remaining from 2001

to be carried to 2003. See the examples that

If you filed your 2003 tax return using

Line 16

begin on pages J-3 and J-4. A deduction for

TeleFile, enter the taxable income from

exemptions of $3,050 is shown on Form

If line 15 is zero or less, enter -0- on line 16.

your TeleFile Tax Record. If you did not

1040, line 39, and line 40, taxable income,

Otherwise, figure the tax on the amount on

file a tax return for 2003, use the amount

is limited to zero. John does not have an

line 15 using:

you would have reported as your taxable

NOL for 2003. John subtracts from the

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income had you been required to file a tax

The 2003 Tax Rate Schedules on page

$1,000 negative amount on Form 1040, line

return. Be sure to keep all your records for

38, the $3,050 deduction for exemptions.

J-7,

2003 until at least 3 years after April 15,

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The result is a negative $4,050, John’s

The 2003 Qualified Dividends and

2005 (or the date you file your 2004 tax

2003 taxable income, which he enters as a

Capital Gain Tax Worksheet on page J-8,

return, if later), even if you did not file a tax

positive amount on line 1 of the 2003 work-

return for 2003.

sheet.

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The Schedule D you filed for 2003

Instructions for 2003 Taxable

(but use the 2003 Tax Rate Schedules on

John had a $3,000 net capital loss de-

Income Worksheet

page J-7 instead of the 2003 Tax Table

duction on Schedule D, line 18 (which was

when figuring the tax on Schedule D, lines

Line 2.

Any net capital loss deduction on

also entered on Form 1040, line 13a), a

50 and 52, or on the Schedule D Tax Work-

your 2003 Schedule D, line 18, is not al-

$7,000 loss on Schedule D, line 17a, and a

sheet, lines 48 and 50).

lowed for income averaging purposes to the

$5,000 capital loss carryover to 2004 (his

extent it did not reduce your capital loss

2003 capital loss carryover to 2004 was

carryover to 2004. This could happen if the

$5,000, not $4,000, because the amount on

2003 Taxable Income Worksheet—Line 13

Keep for Your Records

Complete this worksheet if your 2003 taxable income is zero or less. See the instructions above before completing this

worksheet.

1. Figure the taxable income from your 2003 tax return (or as previously adjusted) without limiting it

to zero. If you had an NOL for 2003, do not include any NOL carryovers or carrybacks to 2003.

Enter the result as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. If there is a loss on your 2003 Schedule D, line 18, add that loss (as a positive

amount) and your 2003 capital loss carryover to 2004. Subtract from that sum

the amount of the loss on your 2003 Schedule D, line 17a, and enter the result

3. If you had an NOL for 2003, enter it as a positive amount. Otherwise, enter as a

positive amount the portion, if any, of the NOL carryovers and carrybacks to

2003 that were not used in 2003 and were carried to years after 2003 . . . . . . . .

4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Subtract line 4 from line 1. Enter the result as a negative amount on Schedule J, line 13 . . . . . . . . .

J-6

Instructions For Schedule J - Income Averaging For Farmers And Fishermen - 2004 Page 6

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