NOL Loss

[TAXMAN]

What happens to a NOL on a prior jt return with a carryover not used and tp died in prior year 2012? Does spouse get to carryover the nol. She continued the farm operation in 2013. Can she step up her basis in farm animals used in breeding cycle? Seen this once before but now not for sure. any thoughts?

[jklcpa]

NOLs, like capital losses, are considered personal to the taxpayer who incurred them and generally cannot be transferred to or used by another taxpayer, including his surviving spouse even if they have consistently filed joint income tax returns.

[kcjenkins]

Judy is right, but I'd add one qualifier. IF they filed as a "Qualified Joint Venture" for their farm, then she'd be entitled to half of the remaining NOL. An unincorporated business jointly owned by a married couple is generally classified as a partnership for Federal tax purposes. For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are a husband and a wife filing a joint return, can elect not to be treated as a partnership for Federal tax purposes.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Election-for-Husband-and-Wife-Unincorporated-Businesses

[jklcpa]

Excellent point, KC.

[TAXMAN]

In essence, tp ran and operated farm. He is deceased along with the c/o of any NOL. Correct? If this being the case can I step up the basis in the breeding stock and equipment? I really am trying to help out this older lady. Thank you.

[kcjenkins]

Yes, sorry we did not address that. If it was 'his' farm, when he died and she inherited his assets, she gets stepped up basis in not only the land but also the livestock and equipment.

[TAXMAN]

thank you. She sold all the animals within 6 months. By stepping up creates virtually no tax. I learned something today. Not a total loss. thank you.