Montana Form Nol Instructions - Montana Net Operating Loss (Nol) And Federal Nol - 2011
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52011 Montana Form NOL Instructions
Reference: 15-30-2119, MCA and 42.15.318, ARM
Introduction
If you are a nonresident who owns a business that operates
both inside and outside of Montana, you have to follow
You may have a Montana net operating loss (NOL) if your
the division of income provisions of the Multistate Tax
deductions for the year are more than your income for the
Compact and the principles of allocation and apportionment
year. Your NOL year is the year that an NOL occurs. Your
to determine the amount of your business-wide loss that is
NOL is either carried back or carried forward and deducted
attributable to Montana.
from your income in another year or years.
Schedule A
To have an NOL, your loss has to generally be caused by
deductions from your:
Use Form NOL, Schedule A to fi gure your NOL.
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trade or business,
Line 1. Enter the amount from your 2011 Montana Form 2
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work as an employee,
line 43. If this is a negative amount, you may have an NOL.
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casualty and theft losses,
Line 6 – Nonbusiness deductions. Enter your deductions
that are not related to your trade or business or your
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moving expenses, or
employment. Montana additions and subtractions that are
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rental property.
considered nonbusiness should also be included in this
A loss from operating a business is the most common
line. Examples of nonbusiness deductions are:
reason for an NOL.
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alimony,
Nonresident, Part-year Resident and
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educator expenses,
Composite Tax Return Participants
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contributions to an IRA or other self-employed
retirement plan,
As a nonresident or a part-year resident, you cannot create
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itemized deductions (except for casualty and theft
a Montana net operating loss when your Montana source
losses and any employee business expenses), and
income (loss) that you reported on Montana Form 2,
Schedule IV, line 16, is a loss. When calculating your net
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the standard deduction (if you do not itemize your
operating loss as a nonresident or a part-year resident you
deductions).
have to include in your calculation both your Montana and
Do not enter your business deductions that are related
non-Montana source income that is included on Form 2,
to your trade or business on line 6. Examples of these
line 43.
deductions are:
If you are participating in a composite return fi led by a
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federal income tax paid on business profi ts,
partnership or S corporation, you cannot create a Montana
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moving expenses,
net operating loss because the partnership or S corporation
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the deduction of one-half of your self-employment
reported a Montana loss on the composite return. In order
tax or your deduction for self-employed health
for you to generate a Montana net operating loss as a
insurance,
participating partner or shareholder, you have to fi le a
Montana Form 2 reporting your total Montana and non-
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rental losses,
Montana source income.
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loss on the sale or exchange of business real
estate or depreciable property,
How to Figure an NOL
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your share of a business loss from a partnership or
There are rules that limit what you can deduct when
S corporation,
fi guring your NOL. In general, you are not allowed to
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ordinary loss on the sale or exchange of stock in
include the following items in determining your NOL:
a small business corporation or a small business
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any deduction for personal exemptions,
investment company,
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capital losses in excess of capital gains,
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casualty and theft losses (even if they involve
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the section 1202 exclusion of 50% of the gain from
nonbusiness property) and employee business
the sale or exchange of qualifi ed small business
expenses (such as union dues, uniforms, tools,
stock,
education expenses, and travel and transportation
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nonbusiness deductions in excess of nonbusiness
expenses) when you itemized your deductions,
income,
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loss on the sale of an accounts receivable (if you
use an accrual method of accounting),
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the domestic production activities deduction, or
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interest and litigation expenses on state and
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net operating loss deduction.
federal income taxes related to your business, and
If your marital or fi ling status has changed, the federal rules
and instructions applicable to these changes in fi ling status
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unrecovered investment in a pension or annuity
apply when computing your NOL, the carrybacks and
claimed on a decedent’s fi nal return.
carryforwards and the refund limits.
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