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NOL Carryforward

 
 
Vernon V Chatman III
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      08-13-2003, 11:53 AM
Have NOL for 2002. MFJ. Husband recently (July 2003) died.
Considering carryforward only option. 2003 is not a problem
because will file MFJ.

If NOL is not fully used on 2003 return (or cannot be used),
can widow carryforward the full remainder when filing as
Single for 2004?

Note: NOL is due to losses in a joint tennent account; CA is
community property state.

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Gene E. Utterback, EA
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      08-15-2003, 12:26 AM
"Vernon V Chatman III" <(E-Mail Removed)> wrote:

> Have NOL for 2002. MFJ. Husband recently (July 2003) died.
> Considering carryforward only option. 2003 is not a problem
> because will file MFJ.
>
> If NOL is not fully used on 2003 return (or cannot be used),
> can widow carryforward the full remainder when filing as
> Single for 2004?
>
> Note: NOL is due to losses in a joint tennent account; CA is
> community property state.


I believe that in community property states the surviving
spouse gets the full use of the NOL as well as a full
adjustment to basis for remaining assets. However, I would
have to double check that before I would sign off on the
return.

I am curious though about your use or vocabulary. You say
you have an NOL due to losses in a joint tenant account.
Are you sure you mean NOL and not Capitol Loss? - I am not
sure the answer would be any different, but I am concerned
that you may be mistreating the loss because you aren't sure
what it really is. NOLs are usually generated by business
losses and Capitol Losses are generated by investment
losses. NOLs can be deducted (usually) in full in the year
they occur, Capitol Loss deductions are limited. Can you be
a bit more clear about the nature of this loss?

Gene E. Utterback, EA

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Vernon V Chatman III
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      08-16-2003, 02:08 AM
"Gene E. Utterback, EA" <(E-Mail Removed)> wrote:
> "Vernon V Chatman III" <(E-Mail Removed)> wrote:


>> Have NOL for 2002. MFJ. Husband recently (July 2003) died.
>> Considering carryforward only option. 2003 is not a problem
>> because will file MFJ.
>>
>> If NOL is not fully used on 2003 return (or cannot be used),
>> can widow carryforward the full remainder when filing as
>> Single for 2004?
>>
>> Note: NOL is due to losses in a joint tennent account; CA is
>> community property state.


> I believe that in community property states the surviving
> spouse gets the full use of the NOL as well as a full
> adjustment to basis for remaining assets. However, I would
> have to double check that before I would sign off on the
> return.
>
> I am curious though about your use or vocabulary. You say
> you have an NOL due to losses in a joint tenant account.
> Are you sure you mean NOL and not Capitol Loss? - I am not
> sure the answer would be any different, but I am concerned
> that you may be mistreating the loss because you aren't sure
> what it really is. NOLs are usually generated by business
> losses and Capitol Losses are generated by investment
> losses. NOLs can be deducted (usually) in full in the year
> they occur, Capitol Loss deductions are limited. Can you be
> a bit more clear about the nature of this loss?


Good observation, but, see my post re NOL; I think there is
no NOL, but I want to cover the client in case I'm wrong:

Form 1045 Sch A line 19 states: "Enter the loss, if any,
from line 17 of Schedule D (Form 1040)." The instructions
for line 19 appear not to exist in Pub 536. I believe that
line 19 really wants line 17 of Sch D minus line 6 Sch D
Form 1040 and minus line 14 Sch D Form 1040; current year
loss.

As I see it including the full amount on Sch D line 17 would
cause carryforward losses to contribute to an NOL.

What am I missing?

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Vernon Chatman
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      08-19-2003, 03:23 AM
"D. Stussy" <(E-Mail Removed)> wrote:
> Vernon V Chatman III wrote:

[snip]

> The revenue ruling that says that capital losses of one
> spouse DIE with that spouse, so at most, she only gets 50%
> (i.e. HER share) of the loss in the computation.
>
> The NOL itself may be limited by this ruling as well when
> carried BEYOND the year of death (but won't be when carried
> back).


If there is no NOL, as I believe, then NOL carryforward/back
is not an issue in this case (they were not in the
investment business).

I'm working on 2002 taxes, spouse died in 2003 so full
capital loss carryforward is ok for 2002 & 2003. 2004 might
be a problem if losses not used up 2003.

The strategy question is: are there capital gains (after
considering basis changes as a result of the death) that can
be generated in the remainder of 2003 to use up the loss
carryforward in 2003 [using up only 1/2 the losses begs the
question of whose loss is used up].

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