Business Loss

[Christian]

A new client has come in whose wife passed on in 2019. She was a beautician and operated a small business. For 2019 the business shows a loss and , of course, was closed. The standard deduction eliminates any federal income tax for 2019. As the loss is not deductible can it be carried forward or is it simply dropped. If memory serves this matter has come up in here and the loss is simply lost.

[Lee B]

I believe that if it generates a Net Operating Loss, then the NOL would carryforward.

[Christian]

My reading is that since the business was disposed of in 2019 the client's wife having died in May and the business simply closed (no sale) the loss cannot be carried forward. But it never hurts to check yourself.

[grandmabee]

No carryforward, but if it creates a NOL then that could be carried forward or backward.

[Christian]

The paraagraph below sorta sinks the ship so to speak. The loss in question generated by the wife's business is effectively lost. Their standard deduction was greater than their agi so no income to apply it against. Well worth a try. 

NOL.pdf

[Edsel]

Looks like the passage from Christian above does in fact sink the ship.

In the cases for self-employed individuals, NOL reduces the taxable income for the succeeding year, but not for the purposes of self-employment tax.  For some self-employed taxpayers, their SE tax is greater than their income tax, especially if they have children.  SE people often don't understand why their taxes are not reduced with an NOL.