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When determining the portion of deductible expenses

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

attributable to income from your trade or business, the

remains after the 20-year carryforward period.

expenses have to be multiplied by the ratio of your net

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

income from the trade or business to your Montana

Exceptions to Two-Year Carryback Rule

adjusted gross income.

You can qualify for a longer carryback period if you have

When determining the portion of federal tax attributable to

eligible losses or farming losses.

income from your trade or business, the federal tax has

Eligible loss. The carryback period for eligible losses is

to be multiplied by the ratio of your net business income

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

to your Montana adjusted gross income for the year the

NOL is:

federal tax was incurred.

•

from a casualty or theft, or

Line 7 – Nonbusiness Income. Enter only your income

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attributable to a presidentially declared disaster for

that is not related to your trade or business or your

a qualiﬁ ed small business.

employment. For example, enter your annuity income,

dividends, and interest on investments. Also, include your

Qualiﬁ ed Small Business

share of nonbusiness income from your partnerships and S

You have a qualiﬁ ed small business if you are a sole

corporations. Montana additions and subtractions that are

proprietorship or a partnership that has average annual

considered nonbusiness should also be included on this

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

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

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

your trade or business or your employment. This includes

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

your salaries and wages, self-employment income, and

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

your share of business income from partnerships and S

in existence.

corporations. Also, do not include your rental income or

Farming Loss. When you have a farming loss, your

ordinary gain from the sale or other disposition of business

carryback period is ﬁ ve years. Your farming loss is the

real estate or depreciable business property.

smaller of:

Line 17 – Adjustment for Section 1202 Exclusion. Enter

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the amount that would be the NOL for the tax year

any gain you excluded under section 1202 on the sale or

if only the income and deductions attributable to

exchange of qualiﬁ ed small business stock.

your farming businesses were taken into account,

Line 19 through Line 22 – Adjustments for Capital

Losses. Your amount deductible for capital losses is limited

•

the NOL for the tax year.

based on whether these losses are business capital losses

Farming Business

or nonbusiness capital losses.

You have a farming business if your trade or business is

Nonbusiness capital losses. You can deduct your

involved with the:

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

your nonbusiness capital gains without taking into account

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cultivation of land.

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

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raising or harvesting or any agricultural or

capital losses are more than your nonbusiness capital

horticultural commodity.

gains without taking into account any section 1202

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operating a nursery or sod farm.

exclusion, you cannot deduct the excess.

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raising or harvesting a tree bearing fruit, nuts, or

Business capital losses. You can deduct your business

other crops, or ornamental trees.

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

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the raising, shearing, feeding, caring for, training

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your nonbusiness capital gains that are more than

and management of animals is also considered a

the total of your nonbusiness capital losses and

farming business.

excess nonbusiness deductions (line 10), and

You do not have a farming business if:

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your total business capital gains without regard to

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you perform contract harvesting,

any section 1202 exclusion (line 12).

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someone else grows or raises an agricultural or

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

horticultural commodity for you, or

of your NOL carryovers or carrybacks from other years.

Enter the total amount of your NOL deduction for losses

•

you merely buy or sell plants or animals grown or

from other years.

raised by someone else.

When to Use Your NOL

Waiving the Five-year Carryback

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

You can choose to treat a farming loss as if it were not

2011, you have to carry back the entire amount of the

a farming loss. If you make this choice, your carryback

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

period will be two years. To make this choice, indicate the

called the carryback period), and then carry forward any

carryback years in the box provided for you on Schedule

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

A before the due date (including extensions). Once you

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

waive the ﬁ ve-year carryback, you cannot revoke it. If you

can choose not to carry back your NOL and only carry

choose not to carryback any of your farming loss, check

Montana Form Nol Instructions - Montana Net Operating Loss (Nol) And Federal Nol - 2011 Page 2

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