Form Nol-F85 - Alabama Computation Of Net Operating Loss Page 2
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1
2Instructions for preparation of Alabama
form nol-f85
Computation of Net Operating Loss – Fiduciary Return
come exclusions. In computing the amount of a net operating loss
(Form 41). This form is used to compute the amount of net oper-
originating for a particular taxable year, the following modifications
ating loss originating in an estate or trust’s tax year. Part III of the
must be made: (i) no deduction may be taken for any net operat-
form is used to make an election to forfeit the carryback of the net
ing loss carried over from another year, (ii) no deduction is allowed
operating loss to a prior tax year. Estates and trusts are allowed
for the personal exemption allowed by §40-18-19, and (iii) non-
a net operating loss deduction by §40-18-15.2. Additional guid-
business deductions, including the federal income tax deduction,
ance concerning the computation of the net operating loss, the
may not exceed nonbusiness income.
carrying back of the net operating loss, and the carrying forward of
Form Preparation
the net operating loss, can be obtained from Alabama Income Tax
Enter the loss year ending. Enter the name of the estate or
Regulation Number 810-3-15.2-.01. Visit the Alabama Department
trust and the federal employer identification number of the estate
of Revenue’s Web site ( alabama.gov) to obtain
or trust.
copies of Alabama income tax forms, schedules, and form prepa-
Part I – Excess of Nonbusiness Deductions Over Non-
ration instructions.
business Income
Alabama Net Operating Loss. An Alabama net operating loss
In computing a net operating loss that originates in a tax year,
is the amount by which deductions (after modifications) exceed
nonbusiness deductions are allowed only to the extent of non-
gross income. A net operating loss may result from losses in-
business income.
curred in a trade or business, from the sale of assets used in a
Lines 1 through 3b – Enter the nonbusiness deductions
trade or business, or from personal casualties or thefts. For the
claimed on the Alabama Form 41 for the tax year, as specified by
purpose of computing the amount of an allowable net operating
the line instructions. For the items included in the amount for line
loss, certain items of income, expense or deduction will be classi-
3b, provide a complete description and explanation.
fied as “business” or “nonbusiness.” The following is a partial list
Line 4. Enter the total of the amounts of lines 1 through 3b.
of items regularly classified as business or nonbusiness:
Lines 5 through 10. Enter the nonbusiness income reported
Business income, expense and deductions include, but are
on the Alabama Form 41 for the tax year, as specified by the line
not limited to: salary and wages; income or loss from a trade or
instructions. For the items included in the amount for line 10, pro-
business; gain or loss from sale of assets used in a trade or busi-
vide a complete description and explanation.
ness; losses on Internal Revenue Code §1244 stock (up to the
Line 11. Enter the total of lines 5 through 10.
amount of ordinary loss allowed for federal income tax purposes);
Line 12. The amount entered on line 12 must be zero, if non-
rental income or loss; income or loss from a partnership; income
business income (line 11) exceeds nonbusiness deductions (line
or loss from an Alabama S corporation; income or loss from farm-
4). Otherwise, subtract the amount on line 11 from the amount on
ing; employee moving expenses; employee business expenses;
line 4, and enter the result on line 12. The amount entered on line
and casualty and theft losses.
12 must also be entered on line 15.
Part II – Computation of Net Operating Loss
Nonbusiness income, expense and deductions include, but
Line 13. Enter the amount from Alabama Form 41, page 1, line
are not limited to: medical expenses; taxes; interest expense;
5 (Alabama Taxable Income).
charitable contributions; miscellaneous deductions other than em-
Line 14. Enter the amount from Form 41, page 1, line 3.
ployee business expenses; gain from the sale of a personal resi-
Line 15. Enter the amount from line 12 of the Form NOL-F85.
dence to the extent recognized in accordance with §40-18-14; gain
or loss from the sale of assets not used in a trade or business (in-
Line 16. Enter the sum of line 14 and line 15.
cluding distributive shares of gains or losses from such assets held
Line 17. Enter the sum of line 13 and line 16. If the amount on
line 17 is zero or greater, the taxpayer does not have a net oper-
by a partnership or an Alabama S corporation); interest and divi-
dend income (including distributive shares of interest and dividend
ating loss for the tax year.
income received by a partnership or an Alabama S corporation);
Part III – Election to Forfeit Carryback Provision
losses on Internal Revenue Code §1244 stock (in excess of the
This part of the form is used to make the election provided for
amount of ordinary loss allowed for federal income tax purposes)
by §40-18-15.2 , allowing the taxpayer to forego carryback the net
federal income tax refunds or tax paid; alimony received; taxable
operating loss to the two prior tax years, and carry the net operat-
pension and annuities; income or loss from a trust or estate; de-
ing loss forward only.
ductible contributions to IRA retirement plans; Keogh retirement
Please Note: losses from Estates and Irrevocable trusts can-
plans; employee benefit contributions paid by an employer; penal-
not be passed to beneficiary or owner see Code of Alabama 1975,
ties for early withdrawal of savings; alimony paid and disability in-
810.3.25.11(f), 810.3.25.05(8)b.
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