My second question relates to carryforward of unused NOL. For this example, let’s assume I have a 2022 NOL that I want to use as a deduction in 2023X, amended. [If you read my previous question, I’m not asking about using the NOL generated in 2015, as I did then, because the worksheet for that type of carryover in Publication 536 2023 has inconsistencies relative to its instructions, so I may put that idea off for further research].
My question relates to carryforward of unused NOL after applying about half the 2022 NOL to the 2023 amended taxable year (I have not yet filed 2023X). Publication 536 for 2023 states “your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year.” I assume in my case that the carryforward year means 2023.
Here are the facts for the example:
NOL generated in year 2022: $22,755.00
AGI for 2023 without NOL deduction: $33,424.43
Taxable Income for 2023 without NOL deduction: $19,522.78
NOL deduction taken in 2023 amended, from 2022 carryforward: $13,621.85
AGI for 2023 amended with the NOL deduction: $13,850.00
Standard Deduction for 2023: $13,850.00
Taxable Income for 2023 amended with the NOL deduction: $0.00
Personal Capital Losses in 2023: $1.72
Personal Capital Gains in 2023: $0.52
Perhaps without direction from the IRS about calculating the difference between NOL deduction and modified taxable income, a person would say the unused carryover above is
NOL generated in year 2022: $22,755.00
NOL deduction taken in 2023 amended using above balance: $13,621.85
Remaining Balance of 2022 NOL: $22,755.00 - $13,621.85 = $9,133.15
However the IRS instruction says “your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year.”
In my case my draft 2023X NOL deduction is $13,621.85 and my modified taxable income is $0.68, resulting in a carryover of $13,621.85 – $0.68 = $13,621.17. I assume I can use the higher number in my example, $13,721.17 as available to carryforward to 2024 taxable year, rather than the smaller number, $9,133.15.
How did I calculate modified taxable income? I used the instructions in Publication 536 which told me
-not to claim a deduction for a carryover balance, which I wouldn’t do
-not to claim a deduction for a later NOL, which I wouldn’t do because I’m not really applying carrybacks to my situation
-I can’t have personal capital losses in excess of personal capital gains, so I added back $0.68
-I must increase my taxable income by Section 1202, which I don’t have in my situation
-I can’t claim a deduction for my exemptions, which I don’t have
-I must refigure any amounts affected by the above, which in my case were not affected
-Your taxable income as modified cannot be less than zero
Assuming everything above is true and accurate, did I correctly calculate the carryover of unused 2022 NOL from 2023X to 2024? I assume I can use the higher number in my example, $13,721.17 as available to carryforward to 2024 taxable year, instead of the simple calculation of available carryforward [$22,755.00 - $13,621.85 = $9,133.15].
Or is the IRS trying to make me forfeit the entire 2022 NOL if not used entirely in 2023? I ask this because on another worksheet, which I believe may not be relevant to me, the modified taxable income excluded the current year NOL deduction. Am I misreading the instruction “you cannot claim an NOL deduction for the NOL carryover you are figuring” and really my modified taxable income is closer to an amount without the NOL deduction, that is $19,522.78, and then my carryover would become essentially zero… is it “use it or lose it?”
Thank u.
