Instructions for Form 1045 (Rev. February 2006) (2005)

Instructions for Form 1045 (Rev. February 2006) - Notices

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Schedule A—NOL

Complete and file this schedule to determine the amount of the NOL that is available for carryback or carryover.

Line 2—Nonbusiness Capital Losses

Do not include on this line any section 1202 exclusion amounts (even if entered as losses on Schedule D (Form 1040) or Schedule D (Form 1041).

Line 6—Nonbusiness Deductions

Enter as a positive number deductions that are not connected with a trade or business. They include:

IRA deductions,
Health savings account deduction,
Archer MSA deduction,
Deductions for payments on behalf of a self-employed individual to a SEP, SIMPLE, or qualified plan,
Alimony paid,
Most itemized deductions (except for state income tax on business profits, casualty and theft losses, and any employee business expenses), and
The standard deduction.

Do not enter business deductions on line 6. These are deductions that are connected with a trade or business. They include:

State income tax on business profits,
Educator expenses,
Moving expenses,
The deduction for one-half of self-employment tax,
Domestic production activities deduction,
Rental losses,
Loss on the sale or exchange of business real estate or depreciable property,
Your share of a business loss from a partnership or an S corporation,
Ordinary loss on the sale or exchange of section 1244 (small business) stock,
Ordinary loss on the sale or exchange of stock in a small business investment company operating under the Small Business Investment Act of 1958,
Loss from the sale of accounts receivable if such accounts arose under the accrual method of accounting, and
If you itemized your deductions, casualty and theft losses (even if they involve nonbusiness property) and employee business expenses (such as union dues, uniforms, tools, and educational expenses).

Line 7—Nonbusiness Income Other Than Capital Gains

Enter income that is not from a trade or business. Examples are ordinary dividends, annuities, and interest on investments.

Do not enter business income on line 7. This is income from a trade or business and includes:

Salaries and wages,
Rental income,
Gain on the sale or exchange of business real estate or depreciable property, and
Your share of business income from a partnership or an S corporation.

For more details on business and nonbusiness income and deductions, see Pub. 536.

Line 17—Section 1202 Exclusion

Enter as a positive number any gain excluded under section 1202 on the sale or exchange of qualified small business stock.

Schedule B—NOL Carryover

Complete and file this schedule to determine the NOL deduction for each carryback year and the amount to be carried forward, if not fully absorbed.

If an NOL is more than the modified taxable income for the earliest year to which it is carried, you must file Schedule B to figure the amount of the NOL to be carried to the next tax year. The amount of the carryover is the excess, if any, of the NOL carryback over the modified taxable income for that earlier year. Modified taxable income is the amount figured on line 8 of
Schedule B.

If you carry two or more NOLs to a tax year, figure your modified taxable income by deducting the NOLs in the order in which they were incurred. First, deduct the NOL from the earliest year, then the NOL from the next earliest year, etc. After you deduct each NOL, there will be a new, smaller, modified taxable income to compare to any remaining NOL.

Make the same entries in each column heading as on page 1 of Form 1045 (see the instructions for Lines 10 Through 27 on page 3).

Line 2

Do not take into account on this line any NOL carryback from 2005 or later. However, do take into account NOLs that occurred in tax years before 2005 and are otherwise allowable as carrybacks or carryovers.

If your taxable income is shown as zero on your tax return (or as previously adjusted) for any carryback year, refigure it without limiting the result to zero, and enter it on line 2 as a negative number.

Line 3—Net Capital Loss Deduction

Individuals. Enter as a positive number the amount, if any, shown (or as previously adjusted) on Schedule D (Form 1040), line 21, for 2004-2005 (line 18 for 1997-2003; line 19 for 1995-1996).

Estates and trusts. Enter as a positive number the amount, if any, shown (or as previously adjusted) on Schedule D (Form 1041), line 16, for 2004-2005 (line 17 for 1997-2003; line 18 for 1995-1996).

Line 4—Section 1202 Exclusion

Enter as a positive number any gain excluded under section 1202 on the sale or exchange of qualified small business stock.

Line 5—Adjustments to Adjusted Gross Income

If you entered an amount on line 3 or line 4, you must refigure certain income and deductions based on adjusted gross income. These include:

The special allowance for passive activity losses from rental real estate activities,
Taxable social security benefits,
IRA deductions,
Excludable savings bond interest,
The exclusion of amounts received under an employer's adoption assistance program,
The student loan interest deduction, and
The tuition and fees deduction.

For purposes of figuring the adjustment to each of these items, your adjusted gross income is increased by the total of the amounts on line 3 and line 4. Do not take into account any NOL carryback from 2005 or later.

Generally, figure the adjustment to each item of income or deduction in the order listed above and, when figuring the adjustment to each subsequent item, increase or decrease adjusted gross income by the total adjustments you figured for the previous items. However, a special rule applies if you received social security benefits and deducted IRA contributions. Use the worksheets in Pub. 590, Individual Retirement Arrangements (IRAs), to refigure your taxable social security benefits and IRA deductions under the special rule.

Enter on line 5 the total adjustments made to the listed items. Attach a computation showing how you figured the adjustments.

Line 6—Adjustment to Itemized Deductions

Individuals. Skip this line if, for the applicable carryback year:

You did not itemize deductions, or
The amounts on Schedule B, line 3 and line 4, are zero.

Otherwise, complete lines 10 through 34 and enter on line 6 the amount from line 34 (or, if applicable, line 12 of the worksheet on page 8).

Estates and trusts. Recompute the miscellaneous itemized deductions shown (or as previously adjusted) on Form 1041, line 15b, and any casualty or theft losses shown (or as previously adjusted) on Form 4684, Casualties and Thefts, line 18, by substituting modified adjusted gross income (see below) for the adjusted gross income of the estate or trust. Subtract the recomputed deductions and losses from the deductions and losses previously shown, and enter the difference on line 6.

Modified adjusted gross income for estates and trusts. For purposes of figuring miscellaneous itemized deductions subject to the 2% limit, figure modified adjusted gross income by adding the following amounts to the adjusted gross income previously used to figure these deductions.

The total of the amounts from lines 3 through 5 of Form 1045,
Schedule B.
The exemption amount shown (or as previously adjusted) on Form 1041, line 20 (line 21 for 1997).
The income distribution deduction shown (or as previously adjusted) on Form 1041, line 18.

For purposes of figuring casualty or theft losses, figure modified adjusted gross income by adding the total of the amounts from lines 3 through 5 of Form 1045, Schedule B, to the adjusted gross income previously used to figure these losses.

Line 9—NOL Carryover

After completing all applicable columns, carry forward to 2006 the amount, if any, on line 9 of the column for the 1st preceding tax year.

Line 22—Refigured Charitable Contributions

Refigure your charitable contributions using line 20 as your adjusted gross income unless, for any preceding tax year:

You entered an amount other than zero on line 19, and
You had any items of income or deductions based on adjusted gross income which are listed in the instructions for line 5 of
Schedule B on page 6.

If you cannot use the amount from line 20 as your adjusted gross income, figure your adjusted gross income as follows.

Figure the adjustment to each item of income or deduction in the same manner as explained in the instructions for line 5 of Schedule B on page 6, except do not take into account any NOL carrybacks when figuring adjusted gross income. Attach a computation showing how you figured the adjustments.
Add lines 3, 4, 10, and 19 of Schedule B to the total adjustments you figured in (1) above. Use the result as your adjusted gross income to refigure charitable contributions.

For NOL carryover purposes, you must reduce any charitable contributions carryover to the extent that the NOL carryover on line 9 is increased by any adjustment to charitable contributions.

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Itemized Deductions Limitation Worksheet

Line 34

Complete the worksheet on page 8 if line 18, Schedule B, is more than:

$114,700 for 1995 ($57,350 if married filing separately),
$117,950 for 1996 ($58,975 if married filing separately),
$121,200 for 1997 ($60,600 if married filing separately),
$124,500 for 1998 ($62,250 if married filing separately),
$126,600 for 1999 ($63,300 if married filing separately),
$128,950 for 2000 ($64,475 if married filing separately),
$132,950 for 2001 ($66,475 if married filing separately),
$137,300 for 2002 ($68,650 if married filing separately),
$139,500 for 2003 ($69,750 if married filing separately), or
$142,700 for 2004 ($71,350 if married filing separately).

Only complete a column for each year that meets the above requirements.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You may use Form 1045 to apply under section 6411 for a quick refund of tax for a prior year affected by certain carrybacks. If you file Form 1045, you are required to give us the requested information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. Section 6109 requires that you disclose your taxpayer identification number (SSN, ITIN, or EIN). If you do not provide the information requested, we may be unable to process this application.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law.

Generally, tax returns and return information are confidential, as stated in section 6103. However, section 6103 allows or requires the Internal Revenue Service to disclose or give the information shown on your tax return to others as described in the Internal Revenue Code. For example, we may disclose your tax information to the Department of Justice, to enforce the tax laws, both civil and criminal, and to cities, states, the District of Columbia, U.S. commonwealths or possessions, and certain foreign governments to carry out their tax laws. We may disclose your tax information to the Department of Treasury and contractors for tax administration purposes; and to other persons as necessary to obtain information which we cannot get in any other way in order to determine the amount of or to collect the tax you owe. We may disclose your tax information to the Comptroller General of the United States to permit the Comptroller General to review the Internal Revenue Service. We may disclose your tax information to Committees of Congress; federal, state, and local child support agencies; and to other federal agencies for the purposes of determining entitlement for benefits or the eligibility for and the repayment of loans. We may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.

Recordkeeping	19 hr., 39 min.
Learning about the law or the form	8 hr., 41 min.
Preparing the form	11 hr.
Copying, assembling, and sending the form to the IRS	1 hr., 3 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave., NW, IR-6406, Washington, DC 20224.

Do not send the form to this address. Instead, see Where To File on page 2.