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Posted by Reza on June 23, 2006, 3:10 am
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An individual has schedule C income of $250K in 2005, 84K
loss in 2004, 30K income in 2003 and 25K income in 2002. He
did not file 2004 tax return as of now. Therefore, he missed
the deadline to elect not to carry back the 2004 NOL. Now he
must first carry back net operating loss 2 years. But in
2003 and 2002 his AGI were lower than his itemized
deductions. Therefore, his taxable income was zero in both
2002 and 2003. (He had to pay self employment tax on
Schedule C income). My questions are as follows:
(1) Does he have to use NOL deduction to offset 2002 and
2003 schedule C income even though there were no taxable
incomes due to higher itemized deduction? Can he choose not
to use NOL in 2002 and 2003? (2) Can he carry back 2004 NOL
to 2001 and 2000 and get a refund? (3) Is there any
guidelines about what amount of NOL should be used in a
particular year? Can a taxpayer use only 10K NOL to offset
his income even though he has a $20K schedule C income? (4)
How AMT for net operating loss affects the taxes?
IRS publications do not address the above scenarios. Your
response will be highly appreciated.
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