Ok.....I hate all of these inconsistencies also. So I went on a quest to find a ruling that had some meat to it.
You may carry the NOL forward for the guy who didn't file his 2009 return since you have it in writing.........but DON'T use that as a blueprint.
Here is IRS's section/law re: NOL carryovers (which will mean the guy who gave you the ok to carry it forward for the person who didn't file)
A section 172(b)(3) election to waive all of the carryback periods with respect to an NOL “must be unequivocal and unambiguous. ” Powers v. Commissioner , 43 F.3d 172, 176 (5 th Cir. 1995). In the absence of a line item or check off block on a tax form to indicate waiver of the carryback period, this intent is communicated by an express and unambiguous written statement from the taxpayer indicating that the taxpayer is foregoing the carryback period. A taxpayer’s method of reporting an NOL on the taxpayer’s tax returns does not constitute a binding election with regard to that NOL. In Garland v. Commissioner , T.C.Memo 1993-190, the taxpayers noted NOL carryovers on their Schedule C forms for various taxable years but did not file any timely statements electing to fore go the carryback period with regard to such NOLs. Under these circumstances, no valid election to fore go the carryback periods was made.
I've looked at a lot of web sites, but this one gives the BEST description I could find, and came from http://www.legalbitstream.com/irs_materials.asp?pl=i9\
If that's not enough, let me know.......but that worked for my money. (I could find lots of examples, directives, etc in IRS pubs, etc, but I wanted the actual code section that had some meat to it)
As for the lady with the COD that goes to Sch E, you're right........no entry on line 21 for her........As for whether or not you want to mention "Less amount insolvent...see attached 982", on the Sch E, that's sort of a personal decision. I've talked to pros here, and they're running a LITTLE less than 50/50 (with no mention of the insolvency on Sch E with a small lead ...I personally wouldn't do it, but some of the preparers I respect very much would. So that one is your call, its your return)
Line 21 is for personal COD....not business......(my mistake........sorry)
As for the NOL being bigger than the exemption.....that is always my first landmark (just for me....other people use other reminders) the next thing I look at is whether they itemized or not...if they didn't, then I see if the NOL is bigger than the exemption + the standard deduction.
If they itemized.........then I generally pull out the worksheets........
Yes, I'm enjoying the weekend..Thanks for asking.....we're having a cook out at our home tomorrow, and we celebrate my youngest grandson's 8tth birthday on Monday........what are your plans?
As for payments between you and me.........you've always been fair with me..........and I try to give you everything you ask for........alot of what you ask for I do for my fellow preparers for free all the time........so for now, if you throw me $15 every so often, (which was my original payment for your question....but in bonus form, I get a tad extra) my creditors may actually send you a Christmas Card.....
I'm certainly not looking for payment for every single follow up......and JA states you can ask as many follow up questions as you want for free...........so we're sort of between the 2 extremes.
If that doesn't work for you, let me know....I think we both know that we work together pretty well. ..