[jeff]

REG Resources:

Free REG Notes & Audio – https://www.another71.com/cpa-exam-study-plan

REG 10 Point Combo: https://www.another71.com/products-page/ten-point-combo

REG Score Release: https://www.another71.com/cpa-exam-scores-results-release

[Kenada]

I will try to answer the NOL question for you.

NOL is generally business loss but can also occur for an Individual through a personal casualty loss.

It will come through your Sch C – Business Income.

You will start with your

Taxable Business Income (xxxx.xx)

Non Business Deductions xxxx.xx

Non Business Income (xxxx.xx)

Personal Exemption 3900.00

NOL (xxxx.xx)

Example: – A owns a business and it incurred a loss of 20,000.00. He has Interest earned from his personal bank of 1800.00 and has deduction from interest and taxes of 9000.00. For 2013 the personal exempt it 3900.00

His NOL will be

(20,000) + 9000.00 – (1,800.00) + 3,900 = (8,900)

9,000.00 is added back as it is consider to be excess nonbusiness deductions (normally itemized deductions) over nonbusiness income.

You can not include the following :-

Personal Exemptions can not be included in the computation of NOL.

Excess if non Business Deductions

Do not include any NOL from another year in the computation

Excess Capital losses over Capital Gains.

Domestic Production Activities Deductions

Does this help?

FAR 05/27/14; 786/110 - Done !

[Journhi]

@insiyah24

Thank you for your help! It does help 🙂

I am using Roger too and i read this example in Wiley, but didn't understand it before.

It's kinda funny because my REG score was weak for Individual tax and ethics and comparable/strong for the rest (opposite as you).

Good luck on your exam!

FAR: 62;79
AUD: 76
REG:67; 77
BEC: 68;66; 12/05/13

[Journhi]

@insiyah24

Thank you for your help! It does help 🙂

I am using Roger too and i read this example in Wiley, but didn't understand it before.

It's kinda funny because my REG score was weak for Individual tax and ethics and comparable/strong for the rest (opposite as you).

Good luck on your exam!

FAR: 62;79
AUD: 76
REG:67; 77
BEC: 68;66; 12/05/13

[Kenada]

No prob 🙂 I find it helps me when i actually write the example out and make it my own.

Also a friend of mine mentioned to look at that tax forms and see how the information flows through there. It will make much more sense if you did that for individual taxes. I think there is a SIM in Wiley that asks you to fill in the amounts into the form.

lastly, what i did was re wrote from Rogers first page the flow on how the information flows on an individual tax form 1040. I wrote all the mnemonics until it stuck in my head. Then as I did questions I started to see oh yes this goes here and there.

So now I am going into depth in the topics I am weak in. Re-doing the Wiley homework book. Re doing the Wiley test bank. making my own notes etc.

Good luck on your exam too 🙂

FAR 05/27/14; 786/110 - Done !

[Kenada]

No prob 🙂 I find it helps me when i actually write the example out and make it my own.

Also a friend of mine mentioned to look at that tax forms and see how the information flows through there. It will make much more sense if you did that for individual taxes. I think there is a SIM in Wiley that asks you to fill in the amounts into the form.

lastly, what i did was re wrote from Rogers first page the flow on how the information flows on an individual tax form 1040. I wrote all the mnemonics until it stuck in my head. Then as I did questions I started to see oh yes this goes here and there.

So now I am going into depth in the topics I am weak in. Re-doing the Wiley homework book. Re doing the Wiley test bank. making my own notes etc.

Good luck on your exam too 🙂

FAR 05/27/14; 786/110 - Done !

[Newbe654]

Hi everyone! Finally got my Becker REG book today and can start studying! Taking the exam Nov. 30th… Well gotta go start. Good luck and pleasant studying to everyone.

[Newbe654]

Hi everyone! Finally got my Becker REG book today and can start studying! Taking the exam Nov. 30th… Well gotta go start. Good luck and pleasant studying to everyone.

[Anonymous]

@ insiyah24 I also found your NOL explanation helpful. When you said that you would not be able to include the $9,000 Non-business deduction, would you also not be allowed to include the $3,900 personal exemption? I saw that in the list of items you cannot include at the bottom. Just wanted to make sure there wasn't something I was missing. Thanks!

[Anonymous]

@ insiyah24 I also found your NOL explanation helpful. When you said that you would not be able to include the $9,000 Non-business deduction, would you also not be allowed to include the $3,900 personal exemption? I saw that in the list of items you cannot include at the bottom. Just wanted to make sure there wasn't something I was missing. Thanks!

[Kenada]

Hello Cupcakes,

That is what I see stated on the materials I have and the reason why would be you can't make your NOL amount increase due to deductions.

“There are rules that limit what can be deducted when figuring an NOL. In general, the following items are not allowed when figuring an NOL.

Any deduction for personal exemptions.

Capital losses in excess of capital gains.

Section 1202 exclusion of 50% of the gain from the sale or exchange of qualified small business stock.

Nonbusiness deductions in excess of nonbusiness income.

Net operating loss deduction.

The domestic production activities deduction”

https://www.taxslayerpro.com/kb/50325/Net-Operating-Loss-WorksheetForm-1045?language=1&mostViewed=True

FAR 05/27/14; 786/110 - Done !

[Kenada]

Hello Cupcakes,

That is what I see stated on the materials I have and the reason why would be you can't make your NOL amount increase due to deductions.

“There are rules that limit what can be deducted when figuring an NOL. In general, the following items are not allowed when figuring an NOL.

Any deduction for personal exemptions.

Capital losses in excess of capital gains.

Section 1202 exclusion of 50% of the gain from the sale or exchange of qualified small business stock.

Nonbusiness deductions in excess of nonbusiness income.

Net operating loss deduction.

The domestic production activities deduction”

https://www.taxslayerpro.com/kb/50325/Net-Operating-Loss-WorksheetForm-1045?language=1&mostViewed=True

FAR 05/27/14; 786/110 - Done !

[Kenada]

For purposes of this section, the term “net operating loss” means the excess of the deductions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection

Add back to negative taxable income:

Any NOLD

Excess of capital losses over capital gains

QSBS gain exclusion of §1202 allowed

Personal exemptions

Excess of nonbusiness deductions over nonbusiness income

G/L from disposition of business property subject to depreciation and real property used in trade or business are considered business income and deductions

Treat personal casualty losses are business (so can generate an NOL)

Charitable contributions considered non-business.

Alimony paid = non-business (Monfore, TCM 1988-197)

§404 deductions (deferred comp plans) of an EE = nonbusiness

State income taxes attributable to Schedule C business = business

Deductible moving expenses = business (Rev Rul. 72-195)

Employee business expenses = business

Employee wages = business (1.172-3)

Rental of a residence = business (Lagreide, 23 TC 508 (1954))

Standard deduction = nonbusiness

Manufacturing deduction of §199

[§172(d), 1.172-3 and various court cases, IRS rulings, Schedule A of Form 1045, nice summary in IRS Pub 536]

Here is another example:-

Excess of deductions over income = $11,300

To determine NOL that can be c/b, need to apply 172(d) modifications to $11,300

Excess ded over income (11,300)

Modifications:

Personal exemptions 3,500

STCL (non-business) 1,000

Excess non-business deductions($5,450) over non-business income ($425) 5,025

NOL to c/b or c/f $1,775

FAR 05/27/14; 786/110 - Done !

[Kenada]

For purposes of this section, the term “net operating loss” means the excess of the deductions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection

Add back to negative taxable income:

Any NOLD

Excess of capital losses over capital gains

QSBS gain exclusion of §1202 allowed

Personal exemptions

Excess of nonbusiness deductions over nonbusiness income

G/L from disposition of business property subject to depreciation and real property used in trade or business are considered business income and deductions

Treat personal casualty losses are business (so can generate an NOL)

Charitable contributions considered non-business.

Alimony paid = non-business (Monfore, TCM 1988-197)

§404 deductions (deferred comp plans) of an EE = nonbusiness

State income taxes attributable to Schedule C business = business

Deductible moving expenses = business (Rev Rul. 72-195)

Employee business expenses = business

Employee wages = business (1.172-3)

Rental of a residence = business (Lagreide, 23 TC 508 (1954))

Standard deduction = nonbusiness

Manufacturing deduction of §199

[§172(d), 1.172-3 and various court cases, IRS rulings, Schedule A of Form 1045, nice summary in IRS Pub 536]

Here is another example:-

Excess of deductions over income = $11,300

To determine NOL that can be c/b, need to apply 172(d) modifications to $11,300

Excess ded over income (11,300)

Modifications:

Personal exemptions 3,500

STCL (non-business) 1,000

Excess non-business deductions($5,450) over non-business income ($425) 5,025

NOL to c/b or c/f $1,775

FAR 05/27/14; 786/110 - Done !

[Anonymous]

@insiyah24 Thanks for the additional info.!

[Anonymous]

@insiyah24 Thanks for the additional info.!

[Author]

Replies