Prior year business loss

[randyL321]

My wife operated a small business which she closed in 2018.  That year she had a small loss of $625.

In TurboTax 2019, it is showing a carryover loss from the prior year of $625.  Why?  The business was closed last year.  Wasn't the loss shown on our 2018 taxes?  I don't understand.  Can anyone help?

Randy

[MinhT1]

The loss from 2018 was carried over to tax year 2019, even though the business was closed in 2018.

That loss carried over to 2019 can be used in 2019 to offset other income and help reduce your tax liability.

[randyL321]

Thanks for replying.  

I understand that the loss was carried over and I understand how this will reduce my tax liability.  But I don't understand why this is permissible  The loss was taken last year.  Why am I permitted to take the loss again in this year when the business no longer exists?  Surely this is a mistake?

Randy

[ColeenD3]

There are two types of losses that this could be. There a NOL, where there was a greater loss than there was income.

More likely, however, she indicated on Schedule C from 2018 that there was not everything was at risk.

Excess business loss limitation. If you are a noncorporate taxpayer and have allowable business losses after taking into account first the at-risk limitations and then the passive loss limitations (this form), your losses may be subject to the excess business loss limitation.

32a All investment is at risk.

32b Some investment is not at risk

Form 8582