1040-US: Charitable contribution carryover is limited when a net operating loss exists

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Question

Why does the tax application limit the charitable contribution carryover differently when the client has a net operating loss?

Answer

In determining the amount of the contribution carryover from a contribution year, the tax application reduces the excess contribution to the extent the excess reduces taxable income in the contribution year. IRC Section 170 (d)(1)(B) is designed to prevent a double tax benefit through interaction of net operating losses and charitable contribution carryovers. The excess charitable deduction can reduce taxable income only once.

Related topic: Carryover reports FAQs (1040)

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