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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
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Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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In 2008 I had a regular NOL of $75K and an AMT NOL of $75K

Resolved Question:

In 2008 I had a regular NOL of $75K and an AMT NOL of $75K (they were very close due to minimal AMT adjustments.) I made the proper and timely election to carry forward the losses.

In 2009 my 1040 line 41 was -$65K which I carried over to form 6251. I also carried over the $75 NOL to line 10 of the 6251.

My AMTI was calculated at $20K--this is BEFORE I calculated the AMTNOL Deduction. This is far below the exemption amount of $35K, so I didn't need the AMTNOL deduction at all. 90% of $20K is $18K. Did I have to use (and lose) $18K of my NOL even though it was not needed?

I calculated my remaining regular NOL carry forward to 2010 at just under $70K. 2010 and 2011 had similar numbers to 2009---very large negative 1040 line 41 amounts. I am worried that although my regular NOL carry forward for 2012 is over $55K, my AMTNOL may be much lower for 2012 when I really need it. I am doing my taxes which are due tomorrow.
Submitted: 1 year ago.
Category: Tax
Expert:  Arthur Rubin replied 1 year ago.

Arthur Rubin :

Thank you for using Just Answer, although you're almost too late, as some options can only be taken on a timely original return.

Arthur Rubin :

To begin with, you don't have an option as to how much AMTNOL is absorbed, but I'll have to check the regulations to determine whether the AMT exemption is taken into account as to how much is absorbed. The law is unclear, and IRS numbered publications are not very helpful.

Arthur Rubin :

So far, I've only found the instructions for form 6251, which state that the AMTNOLD on the form is limited to 90% of the nominal AMTNOL, but it doesn't explicitly say that the amount on that form is the amount "used".

Arthur Rubin :

I can't find anything in the AMT or NOL regulations which discuss the issue, so the IRS will take the position that the calculations you describe are correct; you lose 90% of nominal AMT "taxable income" of your AMTNOLD carryover. Remember that the standard exemption and non-business deductions are not allowable for normal NOL carryover calculations.

Customer:

Yes, I read that and that is the essence of my question. I do realize that the SE and Nonbiz deductions aren't allowed carryovers.

Customer:

I have read that AMTNOL can be "wasted" if applied during non-optimal years, which is what I'm trying to figure out.

Arthur Rubin :

I'm not sure what you mean, exactly. In a sense, so can regular NOL, if you have large non-business deductions or losses in the carryover year. If you look at form 1045 schedule B, you see that non-business deductions and the personal credit are disregarded in determining how much regular NOL is used. It appears that, at least in the instructions for form 6251 line 11, the nominal (which should be called "tentative") AMTI used to limit the AMTNOLD is not adjusted by removing non-business deductions.

Arthur Rubin :

It's strange, and probably wrong, but it looks as if the intent of the instructions were to limit the used AMTNOLD to the lesser of (1) 100% of the "business" AMTI and (2) 90% of the "regular" AMTI.

Customer:

So even though it is not explicitly stated as such, you believe the IRS will contend that 90% of the AMTNOL is foregone each carry forward year? I know that NOL is an arcane endeavor, but there must be some concrete answer to this.

Arthur Rubin :

There are probably PLRs on point. Unfortunately, I no longer have a reliable search engine for PLRs. There don't seem to be IRS Notices. or Revenue Rulings.

Customer:

I think my concern lies with hearing that sometimes a NOL carry back can trigger an AMT tax that was never imposed in the carryback year. Perhaps if the difference between regular NOL and AMTNOL is large enough this can happen? I will have to go back and see how much the 90% of AMTI has gobbled up my NOL for 2009-11. If there is any left, and it is sufficient to fend off AMT for 2012, then my reg NOL carryover can go to work for me to offset income?

Arthur Rubin :

I'm afraid it doesn't appear that the regular NOL carryover used is limited by the amount that reduces the regular tax below the TAMT. Basically, the regular tax system (including NOL) and the AMT (including NOL) are independent taxing mechanisms, except that some elections have to be taken in the same way for both tax systems (examples being the choice to itemize deductions or take the "standard deduction" (which is 0 for AMT) or the choice whether or not to carry an NOL back.)

Customer:

My line 41 from 1040 carried to 6251 in 2009-11 has averaged 65K-70K, and my reg NOL carryovers to 6251 have always been within 10K of those figures up or down for each year. Therefore, my AMTI has never been close to the exemption, and I will have to check but my hope is that the combined 90% of AMTI is still lower than my starting regular NOL. So as long as I can avoid an AMT trigger for 2012 I will be able to use all of the regular NOL tax lowering benefits?

Arthur Rubin :

That seems correct. If there is no TAMT (with or without taking the NOL into account) in 2012, you can use the regular NOL carryover in 2012 to full effect. Is that what you're asking?

Customer:

Yes.

Customer:

for example, my 2010 6251 looked like this: 1040 line 41: (70K), Sch A taxes: 11K , NOL carryover: 63K, Tax Refund: (1K.) AMTI = 3K. AMTNOLD = only $2700?

Arthur Rubin :

Yes, that looks right.

Customer:

I just did the math for all 3 years. My remaining AMTNOL going into 2012 was $45K, which is below 90% of the 71K AMTI and leaves me 14K under the exemption. So I guess it worked out, and I suppose I can't drop the AMTNOLD down just enough to get the AMTI to the exemption point and no further. I assume the remaining 14K is lost. Is that your final thought on this? You've been a big help.

Arthur Rubin :

Yes, I think you've got it. (I found (and bookmarked) another search engine for revenue rulings and PLRs, and it looks like there is nothing relevant to the to the issue.) It appears that you've used up the AMTNOLD carryover in 2012, and your resulting AMTI is below the exemption, so there is no TMT. For 2013, there is no AMTNOLD left. So the 14K is, as you put it, lost.

Customer:

great. thanks again Arthur. Sorry to keep you up so late....

Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1275
Experience: 22 years of tax preparation experience, including individual, trust, and estate returns.
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Arthur Rubin
Arthur Rubin
Tax Professional
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22 years of tax preparation experience, including individual, trust, and estate returns.