IR7 Example 2 LTC loss limitation rule — current year non-allowable deductions only
IRD number | 12–345–678 |
Total gross income | $6,000 |
Expenses/deductions | $10,000 |
Loss | $4,000 |
One owner (shareholder): | Sam (100%) |
IRD number | 91–111–213 |
Sam’s owner’s basis | $5,500.00 |
Company A is in a partnership with another LTC.
Calculate the non-allowable deductions for Sam:
![](../__attachments/13763604/Ir7L-6.png?inst-v=4bad036b-915c-4b16-9d1a-5886ef7ba2d6)
Box 3 is Sam’s non-allowable deductions this year. The amount in Box 3 ($4,500) is shown at Box 24O.
![](../__attachments/13763604/IR7L-7.png?inst-v=4bad036b-915c-4b16-9d1a-5886ef7ba2d6)
Box 5 is Sam’s non-allowable deductions to carry forward. The amount in Box 5 ($4,500) is shown at Box 24R.
Company A’s IR7L would look like this:
![](../__attachments/13763604/image2019-4-2%2014:59:54.png?inst-v=4bad036b-915c-4b16-9d1a-5886ef7ba2d6)
Sam’s Individual income tax return (IR3) Question 19 would look like this:
![](../__attachments/13763604/Ir7L-9.png?inst-v=4bad036b-915c-4b16-9d1a-5886ef7ba2d6)
Sam’s adjusted LTC income is in effect calculated by subtracting his allowable deductions ($5,500) from Company A’s gross income ($6,000) = $500.