Decrescenzo v. Comr., T.C. Memo. 2012-51

(case involves proper place on tax return to deduct net operating loss (NOL) of $51,000 – whether on Schedule C or on Form 1040; petitioner received $131,660 in non-employee compensation from accounting business and didn’t file Form 1040; IRS filed substitute return and determined deficiency including self-employment tax of $15,207; petitioner had NOL carryover from prior years and parties agreed that income could be reduced by amount of carryover ($51,065), but disagreed as to whether carryover offset petitioner’s self-employment income; court determined that I.R.C. §1402(a)(4) operates independently of subsection (a)(5) such that NOL cannot be taken against self-employment tax – petitioner cannot reduce net earnings from self-employment by the NOL carryforward; thus NOL deduction to be taken on Form 1040). 

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