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Big loss on 2010 4797; How do I enter the carry forward into

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Big loss on 2010 4797; How do I enter the carry forward into 2011
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

What type of loss is it? Is it a Net Operating Loss (NOL), or a capital loss? If a NOL, the following applies;

Generally, if you have an NOL for a tax year ending in 2010, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). You can, however, choose not to carry back an NOL and only carry it forward. See Waiving the Carryback Period , later. You cannot deduct any part of the NOL remaining after the 20-year carryforward period.

NOL year. This is the year in which the NOL occurred.

Waiving the Carryback Period

You can choose not to carry back your NOL. If you make this choice, then you can use your NOL only in the 20-year carryforward period. (This choice means you also choose not to carry back any alternative tax NOL.)

To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3) of the Internal Revenue Code.

If you filed your return timely but did not file the statement with it, you must file the statement with an amended return for the NOL year within 6 months of the due date of your original return (excluding extensions). Enter “Filed pursuant to section(NNN) NNN-NNNN2” at the top of the statement.

Once you choose to waive the carryback period, it generally is irrevocable. If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year.

-----------------------------------------------

Deducting a Carryforward

If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form 1040 or Form 1040NR (line 21 for 2010). Estates and trusts include an NOL deduction on Form 1041 with other deductions not subject to the 2% limit (line 15a for 2010).

You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them.

For more detailed information regarding NOLs, you can refer to the following IRS Pub 536:

http://www.irs.gov/publications/p536/ar02.html#en_US_2010_publink1000177352

-----------------------------------------------

If the loss that you are referring to is a capital loss, then you can only claim a maximum of $3,000 per year On the form 8949, (which the amounts will transfer over to the Schedule D) until the loss amount is exhausted. Any remaining amount of loss will be carried forward to future years.
Customer: replied 2 years ago.

The Loss is from a rental property that I held for 4 years and owned 100%; it was foreclosed upon in Jan 2010. I used form 4797 in tax year 2010 and elected to carry forward. This is where I am stompped, 1) turbox tax does not show me the $ amount I can carry forward each year. 2) How do I calculate what I can carryforward to 2011, etc. 3) What forms should I use?

Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,

You would enter this information on the Schedule E. Special rules allow deduction of up to $25,000 of real estate rental losses if other income is less than $100,000 (when the special allowance begins to phase out - it is eliminated when income exceeds $150,000). There is not a cap on the dollar amount that can be carried forward.

Disallowed losses are carried forward to future years, until either the activity is terminated or passive gains are generated from that or another passive activity.
Expert:  Tax.appeal.168 replied 2 years ago.
If you have not completed the Form 8582, this form needs to be completed as well. The final number from this form will transfer over to Line 22 of the the Schedule E. Link to Form 8582:

http://www.irs.gov/pub/irs-pdf/f8582.pdf
Customer: replied 2 years ago.

Your responses have been very helpful. For clarification, I do not have to complete schedule D (8949), correct? I will need to complete 8582 and Schedule E, correct?

Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,

Thank you. Sorry for the delayed response, I was away from the computer. That is correct, you need to complete the Form 8582 and Schedule E.
Customer: replied 2 years ago.

No worries, I stepped away from my computer after I asked the question. One more question, please.

 

I just want to confirm that my rental property was foreclosed upon in 2010,. In 2010, I used form 4797 and schedule E and stated that I wanted to carry forward (form was completed for that too).

 

Now in 2011 I want to use that carryforward on my taxes and I will completed schedule E, as if I still had the rental property, but only to claim a loss up to 25k, and also complete form 8582.

 

This should do it.

Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,

Per the instructions for the form 8582, if you meet ALL the requirements for the exception to file the form, you do not have to submit the form 8582. If you do not meet ALL the requirements for the exception, the Form 8582 is required to be filed. Again the information from the Form 8582 is transferred over to the Schedule E, Line 22.

Link to instructions:

http://www.irs.gov/pub/irs-pdf/i8582.pdf
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