Form Nol-85 - Computation Of Net Operating Loss Page 2
Download a blank fillable Form Nol-85 - Computation Of Net Operating Loss in PDF format just by clicking the "DOWNLOAD PDF" button.
Open the file in any PDF-viewing software. Adobe Reader or any alternative for Windows or MacOS are required to access and complete fillable content.
Complete Form Nol-85 - Computation Of Net Operating Loss with your personal data - all interactive fields are highlighted in places where you should type, access drop-down lists or select multiple-choice options.
Some fillable PDF-files have the option of saving the completed form that contains your own data for later use or sending it out straight away.
ADVERTISEMENT
1
2Instructions For Completing Form NOL-85
General Instructions
Caution: Nonresidents should include only business expenses related to their Ala-
bama source income when completing line 3b.
The Alabama Legislature passed Act 98-502 which amended the net operating
loss deduction for individuals for tax years beginning after December 31, 1997. Rule
Lines 7a–7g. The income items shown on lines 7a-7g are considered nonbusi-
810-3-15-.27 was promulgated to administer the new NOL law set forth in Section
ness income for the purpose of determining an NOL. If you reported income from any
40-18-15.2.
of these sources on Form 40 or Form 40NR, the taxable amount reported should be
A net operating loss is an amount that business deductions (after modifications)
entered on the appropriate line. Examples of items that should be included on these
exceed business income. The most common reason for an NOL is a loss in operat-
lines are as follows:
ing a business or from the sale of business assets. However, casualty and theft
Line 7a. Interest and dividend income including distributive shares of interest and
losses can also create an NOL. Alabama law limits the kinds of deductions and the
dividend income received by a partnership or an Alabama S corporation.
amounts that can be used to figure an NOL.
Line 7b. Gains or losses from the sale of assets not used in a trade or business
The Alabama NOL provision is similar to the Federal NOL in many ways. Fed-
(including distributive shares of gains or losses from such assets held by a part-
eral guidelines will be followed, whenever possible, in administering the Alabama
nership or an Alabama S corporation).
NOL.
Line 7g. Other nonbusiness income includes items such as gains from the sale
Form NOL-85 should be completed to determine if you have an NOL, and if so, the
of a personal residence to the extent recognized for federal purposes, royalty in-
amount that can be carried back or carried forward. If you follow the specific instruc-
come, gambling income, prizes, awards, and director’s fees.
tions below, you should be able to complete Form NOL-85 quickly and accurately.
PART II
Specific Instructions
Computation of Net Operating Loss
Before Part I or Part II can be completed, you must first complete Form 40 or
Line 1. Enter the taxable income shown on Form 40 or Form 40NR on this line.
Form 40NR through the taxable income line for the loss year. If any amount in the
Line 2. When calculating an NOL, a net operating loss carryover or carryback
loss year return results in a negative figure, it should be shown as a negative figure
from another year cannot be used in computing the NOL deduction. If you claimed
on the return instead of zero.
an NOL deduction for another year on the loss year return, thereby reducing taxable
Example:
income, the amount claimed should be entered on this line. The amount should be
2000 Adjusted Gross Income . . . . . . . . . . . ($ 2,000.00)
entered as a positive figure even though it is shown as a negative figure on the loss
Less: Total Deductions . . . . . . . . . . . . . . . .
8,500.00
year return.
Taxable Income . . . . . . . . . . . . . . . . . . . . . ($10,500.00)
Lines 3 and 4. The personal exemption and dependent exemption claimed in
Heading
the loss year return should be entered on these lines.
Enter the name and social security number of the taxpayer exactly as shown on
Line 5. The amount shown on line 9, Part I should be entered on this line.
the loss year return.
Line 7. Combine the negative amount from line 1 with the positive amounts from
In the upper right corner, enter the date that the loss year ends. A calendar year
line 6. If the result is a positive figure, you DO NOT have a net operating loss and
taxpayer should enter 12-31-_____ and a fiscal year taxpayer should enter the date
should not file Form NOL-85.
the fiscal tax year ends.
Example I:
Taxable income from Form 40 . . . . . . . . . . . ($5,000.00)
PART I
Total Modifications . . . . . . . . . . . . . . . . . . . . 7,000.00
Excess Nonbusiness Deductions Over Nonbusiness Income
NET-OPERATING LOSS . . . . . . . . . . . . . . .
.00
Line 1a. Enter the federal income tax claimed as a deduction on the loss year
In Example I above there is no net operating loss since the Total Modifications
return.
$7,000.00 are more than the Taxable Income ($5,000.00).
Line 1b. Enter the total of all losses resulting from the sale of property and other
Example II:
assets not used in a trade or business.
Taxable income from Form 40 . . . . . . . . . . ($15,000.00)
Lines 1c–1h. The adjustments to income for items listed on lines 1c-1h are con-
Total Modifications . . . . . . . . . . . . . . . . . . .
7,000.00
sidered nonbusiness deductions for the purpose of figuring an NOL. If you claimed
NET-OPERATING LOSS . . . . . . . . . . . . . . ($ 8,000.00)
any of these adjustments to income on Part II, Form 40, or Parts II or III of Form
In Example II above, there is a net operating loss of $8,000.00. In order to carry
40NR, the amount claimed should be entered on the appropriate lines.
the loss back or forward you must also complete Form NOL-85A, making the mod-
Lines 2a and 2b. If you claimed the Standard Deduction, enter the amount
ifications as required. See the instructions for Form NOL-85A for further informa-
claimed on line 2a and omit lines 2b, 3a–3b, 4, and 5. If you claimed Itemized De-
tion for carrying the loss back or forward.
ductions, enter on line 2b the total of all itemized deductions claimed in Schedule
A.
PART III
Line 3a. If you claimed a deduction for a casualty or theft loss on Schedule A,
Election to Carry Net Operating Loss Forward
the amount claimed should be entered on this line.
You may elect to forego the carryback of a net operating loss deduction and in-
Line 3b. Enter the total of all business related expenses claimed on Schedule
stead carry the loss forward to the first available year following the loss year. This
A as a miscellaneous deduction, including those expenses (after 2% A.G.I. limita-
election, once made, is irrevocable.
tion) reported on Federal Form 2106. For the purpose of determining an NOL, these
For loss years beginning before January 1, 1998, such an election must be made
include the following expenses if incurred in the production or protection of busi-
ness income:
on or before the due date (with extensions) for filing the income tax return for the tax
year. The election, once made, is irrevocable.
• Union dues
• Safety equipment, small tools, and supplies used in the taxpayer’s job.
For loss years beginning after December 31, 1997, the election to forgo the car-
• Protective clothing, such as hard hats and safety shoes.
ryback period can be made in one of two ways. The election can be made on or be-
• Uniforms required by your employer.
fore the due date (with extensions) for filing the income tax return for the loss year.
• Physical examinations required by your employer.
If no election is made by the due date of the loss year return, then the filing of the
• Dues to professional organizations and chambers of commerce.
next year’s return by the due date, including extensions and claiming the loss on the
• Subscriptions to professional journals.
return shall be considered the taxpayer’s election to forgo the carryback period. The
• Fees to employment agencies to secure employment.
election, once made, is irrevocable.
• Safety deposit box.
If you elect to carry the loss back, attach Form NOL-85 to the loss year return,
• Clerical help.
but DO NOT CHECK THE BOX in Part III. If a proper election to forego the carry-
• Office rent and expenses for office in home.
back period is not made, or is not timely made, the NOL must be carried back to the
• Educational expenses required by employer or to maintain present skills.
earliest year preceding the loss year in which the NOL may be utilized. Attach Form
• Telephone required for business.
NOL-85A to Form 40X, Amended Alabama Individual Income Tax Return for the
• Travel expenses to a second job.
earliest year available when claiming a carryback which is prior to tax year 2008. For
Note Tax preparation fees do not qualify as a business expense for the pur-
tax year 2008 and after you should use a tax form and check the amended box. To
pose of determining an NOL. (If business related, the tax preparation fees should be
carry the loss forward, you should attach Form NOL-85A to the first available year
claimed on Schedule C or Schedule F.)
following the loss year.
ADVERTISEMENT
0 votes
Related Articles
Related forms
Form Nol-f85 - Computation Of Net Operating Loss Fiduciary Return (form 41) - Alabama Department Of Revenue - 2012
Financial
Form Nol-f85a - Application Of Net Operating Loss Carryback Or Carryforward - Fiduciary Return - 2007
Financial
Form Nol-f85a - Application Of Net Operating Loss Carryback Or Carryforward Fiduciary Return - 2009
Financial
Form Nol-f85a - Application Of Net Operating Loss Carryback Or Carryforward Fiduciary Return - 2008
Financial
Related Categories
Parent category: Financial