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Illustrated Form 1045

Wanda’s share of joint MTI . . . . .

$3,750

Martha refigures her taxable income for 2009

− 2,000

Wanda’s NOL deduction . . . . . . .

after carrying back her 2011 NOL as follows:

Wanda’s remaining share . . . . . .

$1,750

The following example illustrates how to use

2009 Adjusted gross income . . .

$50,000

Form 1045 to claim an NOL deduction in a

Step 5.

Less:

carryback year. It includes a filled-in page 1 of

Sam’s share of joint MTI . . . . . . .

$11,250

−10,000

NOL from 2011 . . . . . . . . . . . .

Form 1045.

Wanda’s remaining share . . . . . .

+ 1,750

2009 Adjusted gross income after

Joint MTI to be offset . . . . . . . . .

$13,000

carryback . . . . . . . . . . . . . . . .

$40,000

E x a m p l e .

M a r t h a

S a n d e r s

i s

Step 6.

Less:

self-employed contractor. Martha’s 2011 deduc-

Sam’s NOL deduction . . . . . . . . .

$18,000

Itemized deductions:

tions are more than her 2011 income because of

− 13,000

Joint MTI to be offset . . . . . . . . .

Medical expenses

a business loss. She uses Form 1045 to carry

Sam’s carryover to 2010 . . . . . . .

$5,000

[$6,000 − ($40,000

back her NOL 2 years and claim an NOL deduc-

× 7.5%)] . . . . . . .

$3,000

Joint carryover to 2010 . . . . . . . .

$5,000

tion in 2009. Her filing status in both years was

State income tax . .

+ 2,000

− 5,000

Sam’s carryover . . . . . . . . . . . .

single. See the filled-in Form 1045 later.

Real estate tax . . .

+ 4,000

Wanda’s carryover to 2010 . . . . .

$-0-

Martha figures her 2011 NOL on Form 1045,

Home mortgage

Schedule A (not shown). (For an example using

interest . . . . . . . .

+ 5,000

Wanda’s $2,000 NOL deduction offsets

−14,000

Form 1045, Schedule A, see

Illustrated Form

Total itemized deductions . . . .

$2,000 of her $3,750 share of the joint modified

Less:

1045, Schedule A

under

How To Figure an

NOL,

taxable income and is completely used up. She

− 3,650

Exemption . . . . . . . . . . . . . . .

earlier.) She enters the $10,000 NOL from Form

has no carryover to 2010. Sam’s $18,000 NOL

2009 Taxable income after

1045, Schedule A, line 25, on Form 1045, line

deduction offsets all of his $11,250 share of joint

carryback . . . . . . . . . . . . . . . .

$22,350

1a.

modified taxable income and the remaining

Martha completes lines 10 through 25, using

$1,750 of Wanda’s share. His carryover to 2010

Martha then completes lines 10 through 25,

the “Before carryback” column under the column

is $5,000.

using the “After carryback” column under the

for the second preceding tax year ended 12/31/

column for the second preceding tax year ended

09 on page 1 of Form 1045 using the following

12/31/09. On line 10, Martha enters her $10,000

amounts from her 2009 return.

NOL deduction. Her new adjusted gross income

on line 11 is $40,000 ($50,000 − $10,000). To

2009 Adjusted gross income . . .

$50,000

complete line 12, she must refigure her medical

expense deduction using her new adjusted

Itemized deductions:

gross income. Her refigured medical expense

Medical expenses

[$6,000 − ($50,000

deduction is $3,000 [$6,000 − ($40,000 ×

× 7.5%)] . . . . . . .

$2,250

7.5%)]. This increases her total itemized deduc-

State income tax . .

+ 2,000

tions to $14,000 [$13,250 + ($3,000 − $2,250)].

Real estate tax . . .

+ 4,000

Martha uses her refigured taxable income

Home mortgage

($22,350) from line 15, and the tax tables in her

interest . . . . . . . .

+ 5,000

2009 Form 1040 instructions to find her income

tax. She enters the new amount, $2,939, on line

Total itemized deductions . . . .

$13,250

16, and her new total tax liability, $9,059, on line

Exemption . . . . . . . . . . . . . . .

$3,650

25.

Martha used up her $10,000 NOL in 2009 so

Income tax . . . . . . . . . . . . . . .

$4,544

she does not complete a column for the first

Self-employment tax . . . . . . . . .

$6,120

preceding tax year ended 12/31/2010. The de-

crease in tax because of her NOL deduction

(line 27) is $1,605.

Martha files Form 1045 after filing her 2011

return, but no later than December 31, 2012.

She mails it to the Internal Revenue Service

Center for the place where she lives as shown in

the 2011 instructions for Form 1040 and at-

taches a copy of her 2011 return (including the

applicable forms and schedules).

Publication 536 (2011)

Page 10

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2011 Page 10

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