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Do not refigure the itemized deduction

5. Multiply the refigured tax on your joint re-

Example 2. Assume the same facts as in

for charitable contributions.

turn by the amount figured in (4). This is

Example

1, except that both Mark and Nancy

your share of the joint tax liability.

had deductions in 2011 that were more than

CAUTION

their income. Figured separately, his NOL is

Figuring your contribution toward tax

$1,800 and her NOL is $3,000. The sum of their

Finally, use your refigured taxable income

paid. Unless you have an agreement or clear

separate NOLs ($4,800) is less than their

(Form 1045, line 15, using the “After carryback”

evidence of each spouse’s contributions toward

$5,000 joint NOL because his deductions in-

column) to refigure your total tax liability.

the payment of the joint tax liability, figure your

cluded a $200 net capital loss that is not allowed

Refigure your income tax, your alternative mini-

contribution by adding the tax withheld on your

in figuring his separate NOL. The loss is allowed

mum tax, and any credits that are based on, or

wages and your share of joint estimated tax

in figuring their joint NOL because it was offset

limited to, the amount of tax. (On Form 1045,

payments or tax paid with the return. If the origi-

by Nancy’s capital gains. Mark’s share of their

use lines 16 through 25, and the “After car-

nal return for the carryback year resulted in an

$5,000 joint NOL is $1,875 ($5,000 × $1,800/

ryback” column.) The earned income credit, for

overpayment, reduce your contribution by your

$4,800) and Nancy’s is $3,125 ($5,000 −

example, may be affected by changes to ad-

share of the tax refund. Figure your share of a

$1,875).

justed gross income or the amount of tax (or

joint payment or refund by the same method

Joint return in previous carryback or car-

used in figuring your share of the joint tax liabil-

both) and, therefore, must be recomputed. If you

ryforward year. If only one spouse had an

ity. Use your taxable income as originally re-

become eligible for a credit because of the car-

NOL deduction on the previous year’s joint re-

ported on the joint return in steps (1) and (2)

ryback, complete the form for that specific credit

turn, all of the joint carryover is that spouse’s

above, and substitute the joint payment or re-

(such as the EIC Worksheet) for that year.

carryover. If both spouses had an NOL deduc-

fund for the refigured joint tax in step (5).

While it is necessary to refigure your income

tion (including separate carryovers of a joint

tax, alternative minimum tax, and credits, do not

NOL, figured as explained in the

previous dis-

Change in Filing Status

refigure your self-employment tax.

cussion), figure each spouse’s share of the joint

carryover through the following steps.

Deducting a Carryforward

If you and your spouse were married and filed a

joint return for each year involved in figuring

1. Figure each spouse’s modified taxable in-

NOL carrybacks and carryovers, figure the NOL

If you carry forward your NOL to a tax year after

come as if he or she filed a separate re-

deduction on a joint return as you would for an

the NOL year, list your NOL deduction as a

turn. See

Modified taxable income

under

individual. However, treat the NOL deduction as

negative figure on the Other income line of Form

How To Figure an NOL

Carryover, later.

a joint NOL.

1040 or Form 1040NR (line 21 for 2011). Es-

2. Multiply the joint modified taxable income

If you and your spouse were married and

tates and trusts include an NOL deduction on

you used to figure the joint carryover by a

filed separate returns for each year involved in

Form 1041 with other deductions not subject to

fraction, the numerator of which is spouse

figuring NOL carrybacks and carryovers, the

the 2% limit (line 15a for 2011).

A’s modified taxable income figured in (1)

spouse who sustained the loss may take the

You must attach a statement that shows all

NOL deduction on a separate return.

and the denominator of which is the total of

the important facts about the NOL. Your state-

the spouses’ modified taxable incomes fig-

Special rules apply for figuring the NOL car-

ment should include a computation showing

ured in (1). This is spouse A’s share of the

rybacks and carryovers of married people

how you figured the NOL deduction. If you de-

whose filing status changes for any tax year

joint modified taxable income.

duct more than one NOL in the same year, your

involved in figuring an NOL carryback or carry-

3. Subtract the amount figured in (2) from the

statement must cover each of them.

over.

joint modified taxable income. This is

spouse B’s share of the joint modified tax-

Change in Marital Status

Separate to joint return. If you and your

able income.

spouse file a joint return for a carryback or car-

ryforward year, and were married but filed sepa-

If you and your spouse were not married to each

4. Reduce the amount figured in (3), but not

rate returns for any of the tax years involved in

other in all years involved in figuring NOL car-

below zero, by spouse B’s NOL deduction.

figuring the NOL carryback or carryover, treat

rybacks and carryovers, only the spouse who

5. Add the amounts figured in (2) and (4).

the separate carryback or carryover as a joint

had the loss can take the NOL deduction. If you

carryback or carryover.

file a joint return, the NOL deduction is limited to

6. Subtract the amount figured in (5) from

the income of that spouse.

spouse A’s NOL deduction. This is spouse

Joint to separate returns. If you and your

A’s share of the joint carryover. The rest of

For example, if your marital status changes

spouse file separate returns for a carryback or

the joint carryover is spouse B’s share.

because of death or divorce, and in a later year

carryforward year, but filed a joint return for any

you have an NOL, you can carry back that loss

or all of the tax years involved in figuring the

only to the part of the income reported on the

NOL carryover, figure each of your carryovers

Example. Sam and Wanda filed a joint re-

joint return (filed with your former spouse) that

separately.

turn for 2009 and separate returns for 2010 and

was related to your taxable income. After you

2011. In 2011, Sam had an NOL of $18,000 and

Joint return in NOL year. Figure each

deduct the NOL in the carryback year, the joint

Wanda had an NOL of $2,000. They choose to

spouse’s share of the joint NOL through the

rates apply to the resulting taxable income.

carry back both NOLs 2 years to their 2009 joint

following steps.

return and claim a $20,000 NOL deduction.

Refund limit. If you are not married in the NOL

1. Figure each spouse’s NOL as if he or she

Their joint modified taxable income (MTI) for

year (or are married to a different spouse), and

filed a separate return. See

How To Figure

2009 is $15,000, and their joint NOL carryover to

in the carryback year you were married and filed

NOL, earlier. If only one spouse has an

2010 is $5,000 ($20,000 – $15,000). Sam and

a joint return, your refund for the overpaid joint

NOL, stop here. All of the joint NOL is that

Wanda each figure their separate MTI for 2009

tax may be limited. You can claim a refund for

spouse’s NOL.

as if they had filed separate returns. Then they

the difference between your share of the

figure their shares of the $5,000 carryover as

2. If both spouses have an NOL, multiply the

refigured tax and your contribution toward the

follows.

joint NOL by a fraction, the numerator of

tax paid on the joint return. The refund cannot be

which is spouse A’s NOL figured in (1) and

more than the joint overpayment. Attach a state-

the denominator of which is the total of the

ment showing how you figured your refund.

Step 1.

spouses’ NOLs figured in (1). The result is

Sam’s separate MTI . . . . . . . . . .

$9,000

Figuring your share of a joint tax liability.

spouse A’s share of the joint NOL. The

Wanda’s separate MTI . . . . . . . .

+ 3,000

rest of the joint NOL is spouse B’s share.

There are five steps for figuring your share of the

Total MTI . . . . . . . . . . . . . . . . .

$12,000

refigured joint tax liability.

Step 2.

Example 1. Mark and Nancy are married

1. Figure your total tax as though you had

Joint MTI . . . . . . . . . . . . . . . . .

$15,000

and file a joint return for 2011. They have an

filed as married filing separately.

Sam’s MTI ÷ total MTI

NOL of $5,000. They carry the NOL back to

($9,000 ÷ $12,000) . . . . . . . . . . .

× .75

2. Figure your spouse’s total tax as though

2009, a year in which Mark and Nancy filed

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

$11,250

your spouse had also filed as married filing

separate returns. Figured separately, Nancy’s

Step 3.

separately.

2011 deductions were more than her income,

Joint MTI . . . . . . . . . . . . . . . . .

$15,000

and Mark’s income was more than his deduc-

3. Add the amounts in (1) and (2).

− 11,250

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

tions. Mark does not have any NOL to carry

Wanda’s share of joint MTI . . . . .

$3,750

4. Divide the amount in (1) by the amount in

back. Nancy can carry back the entire $5,000

(3).

NOL to her 2009 separate return.

Step 4.

Publication 536 (2011)

Page 9

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2011 Page 9

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