Illustrated Form 1045, Schedule A
The following example illustrates how to figure an NOL. It includes filled-in pages 1 and 2 of Form 1040 and Form 1045, Schedule A.
Glenn Johnson is in the retail record business. He is single and has the following income and deductions on his Form 1040 for 2012. See the illustrated Form 1040, later.
|Wages from part-time job||$1,225|
|Interest on savings||425|
|Net long-term capital gain on sale of real estate used in business||2,000|
|Glenn's total income||$3,650|
|Net loss from business (gross income of $67,000 minus expenses of $72,000)||$5,000|
|Net short-term capital loss
on sale of stock
|Glenn's total deductions||$15,750|
Glenn's deductions exceed his income by $12,100 ($15,750 − $3,650). However, to figure whether he has an NOL, certain deductions are not allowed. He uses Form 1045, Schedule A, to figure his NOL. See the illustrated Form 1045, Schedule A, later.
The following items are not allowed on Form 1045, Schedule A.
|Nonbusiness net short-term capital loss||$1,000|
(standard deduction, $5,950) minus
nonbusiness income (interest, $425)
|Deduction for personal exemption||3,800|
|Total adjustments to net loss||$10,325|
Therefore, Glenn's NOL for 2012 is figured as follows:
|Glenn's total 2012 income||$3,650|
|Glenn's original 2012 total deductions||$15,750|
|Reduced by the disallowed items||− 10,325||− 5,425|
|Glenn's NOL for 2012||$1,775|