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PDtax
PDtax, CPA, MBA
Category: Finance
Satisfied Customers: 4408
Experience:  Tax professional and business consultant for 35 years.
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I have a net operating loss shown on my 2012 2013 tax 1040s

Customer Question

i have a net operating loss shown on my 2012 2013 tax 1040s i just filed. i was going through A DIVORCE at that time and had legal fees for alimony which were high. 16000 for an accountant. and 20000 each for two attorneys. i also had casualty losses and itemized deductions leaving me with a negative 98,009.00 on line 41 2012 1040. can i amend or use a 1045 to carry back and carry forward my losses?
Submitted: 1 year ago.
Category: Finance
Expert:  PDtax replied 1 year ago.

Hi from just Answer. I'm PDtax. I can assist, but you might not like my answer.

Expert:  PDtax replied 1 year ago.

You had a loss on your filed returns, but you might not have a net operating loss. Individuals can have a net operating loss, but it is easily calculated as business income less business losses. Legal and CPA fees for divorce are not business deductions for those purposes.

To confirm what your NOL is, there is a pretty convoluted worksheet in every decent tax prep software package, or ask your tax pro to compute yours. Itemized deductions, exemptions and most other income and expenses are added back to determine your NOL.

The shortcut I suggest is as follows: Let's say you have $30,000 in wages, and a business loss on Schedule C of $50,000. You will likely have a NOL of -$20,000 after all the other worksheet adjustments are made.

Expert:  PDtax replied 1 year ago.

Even if all your CPA and legal fees might be tax deductible (they aren't), they do not create a NOL for carryback. You might have negative taxable income, but that is not an individual NOL. It is just the starting point.

Iemized deductions like yours likely didn't generate a NOL.

I would review the preparation of your 2012 return as well. Legal and CPA fees incident to divorce are only tax deductible if the portions of the fees relating to tax advice are segregated in billing. These amounts ONLY are itemized deductions.

Thanks for asking at Just Answer. Please rate my assistance to close out your inquiry when you are satisfied with my assistance. I'm PDtax.

Expert:  PDtax replied 1 year ago.

Hi again. PDtax here.

Since your question has been open for a few days, I presume you have reviewed my response.

Please accept my answer and rate my assistance to close out your request.

PDtax