Instructions for Form NOL-F85 "Computation of Net Operating Loss - Fiduciary Return (Form 41)" - Alabama

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Instructions For Preparation of Alabama
Form NOL-F85
Computation of Net Operating Loss – Fiduciary Return
erating loss originating for a particular taxable year, the following
(Form 41). This form is used to compute the amount of net oper-
modifications must be made: (i) no deduction may be taken for
ating loss originating in an estate or trust’s tax year. Part III of the
any net operating loss carried over from another year, (ii) no de-
form is used to make an election to forfeit the carryback of the net
duction is allowed for the personal exemption allowed by §40-18-
operating loss to a prior tax year. Estates and trusts are allowed
19, and (iii) nonbusiness deductions, including the federal income
a net operating loss deduction by §40-18-15.2. Additional guid-
tax deduction, may not exceed nonbusiness income.
ance concerning the computation of the net operating loss, the
Form Preparation
carrying back of the net operating loss, and the carrying forward of
Enter the loss year ending. Enter the name of the estate or
the net operating loss, can be obtained from Alabama Income Tax
trust and the federal employer identification number of the estate
Regulation Number 810-3-15.2-.01. Visit the Alabama Department
or trust.
of Revenue’s Web site (www.revenue. alabama.gov) to obtain
Part I – Excess of Nonbusiness Deductions Over Nonbusi-
copies of Alabama income tax forms, schedules, and form prepa-
ness Income
ration instructions.
In computing a net operating loss that originates in a tax year,
Alabama Net Operating Loss. An Alabama net operating loss
nonbusiness deductions are allowed only to the extent of non-
is the amount by which deductions (after modifications) exceed
business income.
gross income. A net operating loss may result from losses incurred
Lines 1 through 3b – Enter the nonbusiness deductions
in a trade or business, from the sale of assets used in a trade or
claimed on the Alabama Form 41 for the tax year, as specified by
business, or from personal casualties or thefts. For the purpose of
the line instructions. For the items included in the amount for line
computing the amount of an allowable net operating loss, certain
3b, provide a complete description and explanation.
items of income, expense or deduction will be classified as “busi-
Line 4. Enter the total of the amounts of lines 1 through 3b.
ness” or “nonbusiness.” The following is a partial list of items reg-
Lines 5 through 10. Enter the nonbusiness income reported
ularly classified as business or nonbusiness:
on the Alabama Form 41 for the tax year, as specified by the line
Business income, expense and deductions include, but are not
instructions. For the items included in the amount for line 10, pro-
limited to: salary and wages; income or loss from a trade or busi-
vide a complete description and explanation.
ness; gain or loss from sale of assets used in a trade or business;
Line 11. Enter the total of lines 5 through 10.
losses on Internal Revenue Code §1244 stock (up to the amount
Line 12. The amount entered on line 12 must be zero, if non-
of ordinary loss allowed for federal income tax purposes); rental
business income (line 11) exceeds nonbusiness deductions (line
income or loss; income or loss from a partnership; income or loss
4). Otherwise, subtract the amount on line 11 from the amount on
from an Alabama S corporation; income or loss from farming; em-
line 4, and enter the result on line 12. The amount entered on line
ployee moving expenses; employee business expenses; and ca-
12 must also be entered on line 15.
sualty and theft losses.
Part II – Computation of Net Operating Loss
Nonbusiness income, expense and deductions include, but
Line 13. Enter the amount from Alabama Form 41, page 1,
are not limited to: medical expenses; taxes; interest expense; char-
line 5 (Alabama Taxable Income). This calculation cannot include
itable contributions; miscellaneous deductions other than em-
the income distribution deduction on page 1, line 2.
ployee business expenses; gain from the sale of a personal
Line 14. Enter the amount from Form 41, page 1, line 3.
residence to the extent recognized in accordance with §40-18-14;
Line 15. Enter the amount from line 12 of the Form NOL-F85.
gain or loss from the sale of assets not used in a trade or busi-
Line 16. Enter the sum of line 14 and line 15.
ness (including distributive shares of gains or losses from such as-
Line 17. Enter the sum of line 13 and line 16. If the amount on
sets held by a partnership or an Alabama S corporation); interest
line 17 is zero or greater, the taxpayer does not have a net oper-
and dividend income (including distributive shares of interest and
ating loss for the tax year.
dividend income received by a partnership or an Alabama S cor-
Part III – Election to Forfeit Carryback Provision
poration); losses on Internal Revenue Code §1244 stock (in ex-
cess of the amount of ordinary loss allowed for federal income tax
This part of the form is used to make the election provided for
by §40-18-15.2 , allowing the taxpayer to forego carryback the net
purposes) federal income tax refunds or tax paid; alimony re-
ceived; taxable pension and annuities; income or loss from a trust
operating loss to the two prior tax years, and carry the net operat-
or estate; deductible contributions to IRA retirement plans; Keogh
ing loss forward only.
retirement plans; employee benefit contributions paid by an em-
Please Note: losses from Estates and Irrevocable trusts can-
ployer; penalties for early withdrawal of savings; alimony paid and
not be passed to beneficiary or owner see Code of Alabama 1975,
disability income exclusions. In computing the amount of a net op-
810.3.25.05(8)b, 40-18-25(4).
Instructions For Preparation of Alabama
Form NOL-F85
Computation of Net Operating Loss – Fiduciary Return
erating loss originating for a particular taxable year, the following
(Form 41). This form is used to compute the amount of net oper-
modifications must be made: (i) no deduction may be taken for
ating loss originating in an estate or trust’s tax year. Part III of the
any net operating loss carried over from another year, (ii) no de-
form is used to make an election to forfeit the carryback of the net
duction is allowed for the personal exemption allowed by §40-18-
operating loss to a prior tax year. Estates and trusts are allowed
19, and (iii) nonbusiness deductions, including the federal income
a net operating loss deduction by §40-18-15.2. Additional guid-
tax deduction, may not exceed nonbusiness income.
ance concerning the computation of the net operating loss, the
Form Preparation
carrying back of the net operating loss, and the carrying forward of
Enter the loss year ending. Enter the name of the estate or
the net operating loss, can be obtained from Alabama Income Tax
trust and the federal employer identification number of the estate
Regulation Number 810-3-15.2-.01. Visit the Alabama Department
or trust.
of Revenue’s Web site (www.revenue. alabama.gov) to obtain
Part I – Excess of Nonbusiness Deductions Over Nonbusi-
copies of Alabama income tax forms, schedules, and form prepa-
ness Income
ration instructions.
In computing a net operating loss that originates in a tax year,
Alabama Net Operating Loss. An Alabama net operating loss
nonbusiness deductions are allowed only to the extent of non-
is the amount by which deductions (after modifications) exceed
business income.
gross income. A net operating loss may result from losses incurred
Lines 1 through 3b – Enter the nonbusiness deductions
in a trade or business, from the sale of assets used in a trade or
claimed on the Alabama Form 41 for the tax year, as specified by
business, or from personal casualties or thefts. For the purpose of
the line instructions. For the items included in the amount for line
computing the amount of an allowable net operating loss, certain
3b, provide a complete description and explanation.
items of income, expense or deduction will be classified as “busi-
Line 4. Enter the total of the amounts of lines 1 through 3b.
ness” or “nonbusiness.” The following is a partial list of items reg-
Lines 5 through 10. Enter the nonbusiness income reported
ularly classified as business or nonbusiness:
on the Alabama Form 41 for the tax year, as specified by the line
Business income, expense and deductions include, but are not
instructions. For the items included in the amount for line 10, pro-
limited to: salary and wages; income or loss from a trade or busi-
vide a complete description and explanation.
ness; gain or loss from sale of assets used in a trade or business;
Line 11. Enter the total of lines 5 through 10.
losses on Internal Revenue Code §1244 stock (up to the amount
Line 12. The amount entered on line 12 must be zero, if non-
of ordinary loss allowed for federal income tax purposes); rental
business income (line 11) exceeds nonbusiness deductions (line
income or loss; income or loss from a partnership; income or loss
4). Otherwise, subtract the amount on line 11 from the amount on
from an Alabama S corporation; income or loss from farming; em-
line 4, and enter the result on line 12. The amount entered on line
ployee moving expenses; employee business expenses; and ca-
12 must also be entered on line 15.
sualty and theft losses.
Part II – Computation of Net Operating Loss
Nonbusiness income, expense and deductions include, but
Line 13. Enter the amount from Alabama Form 41, page 1,
are not limited to: medical expenses; taxes; interest expense; char-
line 5 (Alabama Taxable Income). This calculation cannot include
itable contributions; miscellaneous deductions other than em-
the income distribution deduction on page 1, line 2.
ployee business expenses; gain from the sale of a personal
Line 14. Enter the amount from Form 41, page 1, line 3.
residence to the extent recognized in accordance with §40-18-14;
Line 15. Enter the amount from line 12 of the Form NOL-F85.
gain or loss from the sale of assets not used in a trade or busi-
Line 16. Enter the sum of line 14 and line 15.
ness (including distributive shares of gains or losses from such as-
Line 17. Enter the sum of line 13 and line 16. If the amount on
sets held by a partnership or an Alabama S corporation); interest
line 17 is zero or greater, the taxpayer does not have a net oper-
and dividend income (including distributive shares of interest and
ating loss for the tax year.
dividend income received by a partnership or an Alabama S cor-
Part III – Election to Forfeit Carryback Provision
poration); losses on Internal Revenue Code §1244 stock (in ex-
cess of the amount of ordinary loss allowed for federal income tax
This part of the form is used to make the election provided for
by §40-18-15.2 , allowing the taxpayer to forego carryback the net
purposes) federal income tax refunds or tax paid; alimony re-
ceived; taxable pension and annuities; income or loss from a trust
operating loss to the two prior tax years, and carry the net operat-
or estate; deductible contributions to IRA retirement plans; Keogh
ing loss forward only.
retirement plans; employee benefit contributions paid by an em-
Please Note: losses from Estates and Irrevocable trusts can-
ployer; penalties for early withdrawal of savings; alimony paid and
not be passed to beneficiary or owner see Code of Alabama 1975,
disability income exclusions. In computing the amount of a net op-
810.3.25.05(8)b, 40-18-25(4).