Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
DH's parents established "Family LLC" to operate the motel they built in the 1980s. DH's father died in 1994 and his mother in 2009.

DH's sister, DS, has a degree in business. She continued to operate the motel but due to family problems neglected to file corporate and personal taxes starting in about 2012. She was executor of Mom's estate but failed to close it. DS is intelligent but unable to organize or execute tasks. DH took over Mom's estate and closed it in 2019.

DH helped DS sell the motel in 2019 just before it went bankrupt. The sale of the motel generated a Net Operating Loss (NOL) due to a large "Pass-through Loss and deduction item." The excellent tax accountant advised me on taking this NOL but unfortunately "fired" the "Family LLC" account due to a mess that I won't describe here so I can't phone her for advice.

I am now preparing DS's personal income tax returns for 2014-2019.

Since "Family LLC" sold the motel in 2019, the NOL comes under the CARES Act.

https://www.mwe.com/insights/individual-loss-carryback-refun...

The CARES Act allows individuals, estates and taxable trusts with certain business losses in 2018, 2019 and 2020, including losses from pass-through entities, to obtain refunds of taxes paid in the prior five years.

Under the CARES Act, an NOL from a tax year beginning in 2018, 2019 or 2020 can be carried back five years. ...Under the CARES Act, a taxpayer must carry back an NOL generated in 2018, 2019 or 2020 to the earliest year in the five-year carryback period. If the earliest year’s taxable income can’t absorb all or part of the NOL, then the taxpayer carries forward any remaining NOL to the next carryback year with taxable income (and so on) until the NOL used up....

Under the CARES Act, businesses can still carry forward NOLs indefinitely. Indefinite NOLs are NOLs generated in a tax year beginning after 2017. This indefinite carryforward period includes any NOLs from 2018, 2019 and 2020 that remain after they are carried back to tax years in the five-year carryback period.
[end quote]

Because the motel fell on hard times, "Family LLC" reported an Ordinary Business Loss (Form K-1, Box 1) in every year from 2014-2019. I did the NOL calculation and attached it to every year from 2014-2018. This uses the 5-year carryback period required by the CARES Act.

Because of the operating losses, the NOLs in these years were larger than the original NOL from 2019.

Now to my question.

I am trying to prepare DS' 2019 1040. The 2019 K-1 reports the Box 10 Net section 1231 gain and Box 13 Pass-through Loss and Deduction Item which created the original NOL. However, the carry-forward NOL from 2018 is larger than the original 2019 NOL due to the ordinary business losses (Box 1).

How should I report the NOL(s) on DS' 2019 personal tax return?

Thank you!
Wendy
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.