form 172 NOL carryover for individuals

[rootsmusic]

In the instructions (page 5), line 3 in Part II refers to "net long-term capital loss".  But what about the deduction limit on capital loss and short-term capital loss, especially as they relate to calculating line 2?  The individual's non-business NOL arose in 2015.  Thanks.

[Terry53029]

Not sure what your question is. An NOL is normally a result of a business loss that is more than personal income for the year resulting in an over all loss.

[rootsmusic]

(Sorry @Terry53029, let me try to clarify.)
1. Should Line 3 be limited by the deduction limitation on net long-term capital loss?
2. In the calculation for Line 2, should short-term capital loss be included in addition to the Line 3 amount?

[Terry53029]

You say his non business NOL from 2015. Is it from a rental or a business ? what caused his NOL from 2015. As far as the instructions for for form 172 it is asking for gain/loss from schedule D. has nothing to do with the $3000 limit on form 1040

[rootsmusic]

Sorry again @Terry53029, I should NOT have described it as "non-"business (my original post can no longer be edited with this correction).  I meant that it arose from closing a business at a loss.

Form 172 replaces Worksheet 2 (appended below).  In Worksheet 2, Line 3 specified "net capital loss deduction".  However in form 172, that line is changed to "net long-term capital loss".  This change is significant, because Line 2 is calculated with the deduction and with short-term capital loss.

If Line 3 is not limited, then it can add more capital loss to Line 2 (calculated with the $3,000 deduction limit on capital loss) in summing to Line 9!
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Worksheet 2. Worksheet To Figure NOL Carryover From 2023 to 2024

(For an NOL Carryforward From a Year Before 2018 (When 2018 Through 2020 Are Intervening Years))

Caution: Don’t use this worksheet for NOL carryforwards from 2018, 2019, or 2020.

For Use by Individuals, Estates, and Trusts (Keep for your records.) See the Worksheet 2 Instructions, earlier.

	NOL Year __________ USE YOUR 2023 FORM 1040, 1040-SR, 1040-NR, OR 1041 TO COMPLETE THIS WORKSHEET:
1.	Enter as a positive number your NOL deduction for the NOL year entered above from Schedule 1 (Form 1040), line 8a; or Form 1041, line 15b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		__________
2.	Enter your taxable income without the NOL deduction for 2023. See instructions     . . . . . . . . . . . . . . . .	__________
3.	Enter as a positive number any net capital loss deduction       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
4.	Enter as a positive number any gain excluded on the sale or exchange of qualified small business stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
5.	Enter as a positive number any qualified business income deduction      . . . . . . . . . . . . . . . . . . . . . . . . .	__________
6.	Enter any adjustments to your adjusted gross income. See instructions      . . . . . . . . . . . . . . . . . . . . . . .	__________
7.	Enter any adjustments to your itemized deductions from line 26 below. See instructions    . . . . . . . . . . .	__________
8.	Modified taxable income. Combine lines 2 through 7. Enter the result (but not less than zero) . . . . . .		__________
9.	NOL carryover to 2024. Subtract line 8 from line 1. Enter the result (but not less than zero) here and on Schedule 1 (Form 1040), line 8a (or line 15a on Form 1041 for other deductions) for 2024               . . . . . . . ADJUSTMENTS TO ITEMIZED DEDUCTIONS (INDIVIDUALS ONLY):		__________
10.	Enter your adjusted gross income without the NOL deduction for the NOL year entered above or later years. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
11.	Combine lines 3, 4, and 6 above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
12.	Modified adjusted gross income. Combine lines 10 and 11 above       . . . . . . . . . . . . . . . . . . . . . . . . . ADJUSTMENT TO MEDICAL EXPENSES:		__________
13.	Enter your medical expenses from Schedule A (Form 1040), line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
14.	Enter your medical expenses from Schedule A (Form 1040), line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
15.	Multiply line 12 above by 7.5% (0.075)          . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
16.	Subtract line 15 from line 14. Enter the result (but not less than zero)     . . . . . . . . . . . . . . . . . . . . . . . . .	__________
17.	Subtract line 16 from line 13            . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADJUSTMENT TO CHARITABLE CONTRIBUTIONS:		__________
18.	Enter your charitable contributions deduction from Schedule A (Form 1040), line 14; or Schedule A (Form 1040-NR), line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
19.	Refigure your charitable contributions deduction using line 12 above as your adjusted gross income. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
20.	Subtract line 19 from line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADJUSTMENT TO CASUALTY AND THEFT LOSSES:		__________
21.	Enter your casualty and theft losses from Form 4684, line 18      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
22.	Enter your casualty and theft losses from Form 4684, line 16      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
23.	Multiply line 12 above by 10% (0.10)           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	__________
24.	Subtract line 23 from line 22. Enter the result (but not less than zero)     . . . . . . . . . . . . . . . . . . . . . . . . .	__________
25.	Subtract line 24 from line 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		__________
26.	Combine lines 17, 20, and 25, and enter the result here and on line 7 . . . . . . . . . . . . . . . . . . . . . . . . .		__________

12                                                                                                                                          Publication 536 (2023)

[Terry53029]

Being that the NOL is from 2015 you will have to use old rules. In either case Capital loss is not allowed to get the NOL carry forward. Just make sure the carry forward does not include the capital gain. I would think you only use the $3000 limit to carry forward as you are not computing the original NOL, but just the carryforward, and using the prior year return only $3000 could be capital loss