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Old 04-15-2014, 01:06 PM
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Is this a tax shelter?

Hi All:

I was wondering if I started a business to do fishing consulting on the water. I would have to purchase a boat and fishing equipment, as well as communications and GPS equipment. I am wondering what my taxes would be, if any, during the time that my business was growing and did not turn a profit. Can anyone give me information, advice or even resources where I can look it up? Thanks



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Old 04-16-2014, 05:26 AM
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Quote:
Originally Posted by dock99 View Post
Hi All:

I was wondering if I started a business to do fishing consulting on the water. I would have to purchase a boat and fishing equipment, as well as communications and GPS equipment. I am wondering what my taxes would be, if any, during the time that my business was growing and did not turn a profit. Can anyone give me information, advice or even resources where I can look it up? Thanks
When you have a business and your expenses exceed your income for the year, you may have a net operating loss for the year.This loss can be used to offset income in other years. How this loss can be used to offset other income depends upon how your business is structured. NOLs most often result from losses from a trade or business.i ma when biz related losses > biz related profits; If you have a nol from your sole proprietorship, you'll normally be able to deduct the loss from your total income from other business ventures or from any salary, wages, or other earnings. If the business loss exceeds your total income for the year, any unused portion of the loss can be used to offset income and reduce taxes in another year. Once you've determined the amount of your NOL in your sole proprietorship business, you need to decide whether to carry the loss backward (and claim a retroactive refund), or forward.NOLs are usually carried back to offset prior years' income before they are carried forward against future years. NOLs may generally be carried back for two years before the year of the loss, which is called the NOL year.

If the loss it carried back, it is used to offset the taxable income of previous years, with the earliest year offset first, 2011 and 2012 in your case. If the loss is not fully used up in the carry back years, any unused portion of the loss may be carried forward for up to 20 years after the NOL year, 2013, in yur case. Any NOL that is not used up in the carryover period is lost.however, You can elect to forgo the carryback period. If you forego the carryback period, you can still only carryover the loss for 20 years into the future.

Because the IRS assumes that most people will want the speedy refund a carryback can provide, you must attach a statement to your tax return for the NOL year, or to an amended return for that year filed within six months of its due date excluding extensions. There are two ways to claim a refund for prior years’ taxes: You can file IRS Form 1040-X within three years, or you can seek a quicker refund by filing IRS Form 1045. If you file Form 1045, the IRS is required to send your refund within 90 days. However, you must file Form 1045 within one year after the end of the year in which the NOL arose so by Dec 31 2014 in your case; for more info on NOL, please visit the IRS website here; http://www.irs.gov/pub/irs-pdf/p536.pdf



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