J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

40.19 Your Net Operating Loss

A net operating loss is generally the excess of deductible business expenses over business income. The net operating loss may also include the following losses and deductions:

• Casualty and theft losses, even if the property was used for personal purposes; see Chapter 18.
• Expenses of moving to a new job location; see Chapter 12.
• Deductible job expenses such as travel expenses, work clothes, costs, and union dues (19.3).
• Your share of a partnership or S corporation operating loss.
• Loss on the sale of small business investment company (SBIC) stock.
• Loss incurred on Section 1244 stock.

An operating loss may not include:

• Net operating loss carryback or carryover from any year.
• Capital losses that exceed capital gain.
• Excess of nonbusiness deductions over nonbusiness income plus nonbusiness net capital gain.
• Deductions for personal exemptions.
• A self-employed person’s contribution to a Keogh plan.
• An IRA deduction.

Income from other sources may eliminate or reduce your net operating loss.

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Filing Instruction

Adjustment for Capital Losses

A net nonbusiness capital loss may not be included in a net operating loss. If nonbusiness capital losses exceed nonbusiness capital gains, the excess is an adjustment that reduces your loss on Schedule A of Form 1045. In figuring your loss, you may take into account business capital losses only ...