FAQs

Question: How can I handle a net operating loss carryforward?

Answer: A net operating loss carryforward is an anticipated tax deduction in excess of regular taxes calculated by Family Law Software.

If you want to focus on the income aspect, you can override the "Other income" line on View/Edit Taxes for each year in which the loss will be carried forward. Enter the amount of the NOL that will be used that year, as a negative number. Then you will be explicitly recognizing the impact of the NOL on income, through its impact on taxes.

If you want to focus on the fact that the anticpated income constitutes an asset, you can enter the estimated after-tax value of the NOL as a Cash & Investment Asset. You would specify the after-tax value as:

NOL * (1-tax rate),

...where tax rate is the marginal rate at which the loss will be deducted.

In that case, you would enter the basis to be the same as value, because you have already entered the after-tax value.

You might also want to click "more info," then click "View/Edit annual value" and show the value as declining in each year in which a part of the NOL is used to reduce tax.

If you entered both the income aspect and the asset aspect, you would fully capture the effect of the NOL carryforward.