12 CSR 10-2.710 - Net Operating Losses on Individual Income Tax Returns
(1) An
individual taxpayer cannot have a negative federal adjusted gross income for
purposes of computing Missouri adjusted gross income or Missouri nonresident
adjusted gross income. An individual who, for federal income tax purposes, has
a negative federal adjusted gross income for a given tax year must compute
Missouri adjusted gross income or Missouri nonresident adjusted gross income
for that tax year as though such individual's federal adjusted gross income was
zero dollars ($0).
(A) Example: For federal
income tax purposes, Taxpayer A's federal adjusted gross income is negative
fifty thousand dollars (-$50,000). Taxpayer A has Missouri addition
modifications of sixty thousand dollars ($60,000), and is entitled to a
Missouri standard deduction of thirteen thousand dollars ($13,000). Taxpayer A
is a Missouri resident, and has no other deductions, credits, or modifications.
In completing the Form MO-1040, Taxpayer A must enter zero dollars ($0) on the
line requesting the taxpayer's federal adjusted gross income. Taxpayer A adds
the Missouri addition modifications of sixty thousand dollars ($60,000),
resulting in a Missouri adjusted gross income of sixty thousand dollars
($60,000). Taxpayer A then deducts the Missouri standard deduction of thirteen
thousand dollars ($13,000), resulting in a Missouri taxable income of
forty-seven thousand dollars ($47,000).
(2) A resident individual taxpayer must
include, as an addition modification in computing Missouri income tax
liability, the following net operating loss deduction amounts, to the extent
used in determining federal taxable income for the tax year and allowed by
Internal Revenue Code section 172:
(A) A net
operating loss deduction carried backward for more than two (2)
years;
(B) A net operating loss
deduction carried forward for more than twenty (20) years; and
(C) A net operating loss deduction claimed
for the tax year in which the loss occurred. Internal Revenue Code section 172
generally does not allow a net operating loss deduction to be claimed for the
same tax year in which the loss occurred.
(3) Any amount of net operating loss
deduction used in determining federal taxable income but disallowed by section
143.121.2(4), RSMo, for Missouri income tax purposes may be carried forward and
taken against any income on the Missouri income tax return for no more than
twenty (20) years after the year of the initial loss.
(4) A nonresident individual taxpayer shall
use, in determining Missouri nonresident adjusted gross income, the portion of
the modification amount prescribed by section 143.121.2(4), RSMo, which relates
to income derived from sources in Missouri.
(5) The addition modification in section
143.121.2(4), RSMo, and as explained in section (2) of this rule, does not
apply to a net operating loss deduction allowed, pursuant to Internal Revenue
Code section 172(b)(1)(B), for the carryback of a farming loss.
Notes
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