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IRS.gov Website
Instructions for Schedule J (Form 1040)
taxmap/instr/i1040sj-007.htm#en_us_publink1000274214

Line 9(p7)

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If you used Schedule J to figure your tax for:
If you figured your tax for both 2011 and 2012 without using Schedule J, enter on line 9 the taxable income from your 2011 tax return (or as previously adjusted by the IRS or corrected on an amended return). But if that amount is zero or less, complete the worksheet below to figure the amount to enter on line 9.
If you did not file a tax return for 2011, use the amount you would have reported as your taxable income had you been required to file a tax return. Be sure to keep all your records for 2011 until at least 3 years after April 15, 2014 (or the date you file your 2013 tax return, if later).
taxmap/instr/i1040sj-007.htm#en_us_publink1000274215

Instructions for 2011 Taxable Income Worksheet(p7)

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taxmap/instr/i1040sj-007.htm#en_us_publink1000274216
Line 2.(p7)
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Any net capital loss deduction on your 2011 Schedule D, line 21, is not allowed for income averaging purposes to the extent it did not reduce your capital loss carryover to 2012. This could happen if the taxable income before subtracting exemptions—shown on your 2011 Form 1040, line 41, or your 2011 Form 1040NR, line 39 (or as previously adjusted)—was less than zero. Enter on line 2 the amount by which your 2011 capital loss carryover to 2012 (the sum of your short- and long-term capital loss carryovers) exceeds the excess of the loss on your 2011 Schedule D, line 16, over the loss on your 2011 Schedule D, line 21. If you had any NOL carrybacks to 2011, be sure you refigured your 2011 capital loss carryover to 2012.
taxmap/instr/i1040sj-007.htm#en_us_publink1000274217
Line 3.(p7)
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If you had an NOL for 2011, enter the amount of that NOL from line 25 of the 2011 Form 1045, Schedule A, you filed with Form 1045 or Form 1040X. If you did not have an NOL for 2011, enter the portion, if any, of the NOL carryovers and carrybacks to 2011 that were not used in 2011 and were carried to years after 2011.
taxmap/instr/i1040sj-007.htm#en_us_publink1000274218
Example.(p7)
John Farmington did not use income averaging for 2010, 2011, or 2012. The taxable income before subtracting exemptions on his 2011 Form 1040, line 41, is a negative $29,900. A deduction for exemptions of $3,700 is shown on line 42, and line 43, taxable income, is limited to zero. John subtracts from the $29,900 loss the $3,700 deduction for exemptions. The result is a negative $33,600, John's 2011 taxable income, which he enters as a positive amount on line 1 of the 2011 Taxable Income Worksheet.
When John filed his 2011 tax return, he had a $3,000 net capital loss deduction on Schedule D, line 21 (which was also entered on Form 1040, line 13), and a $7,000 loss on Schedule D, line 16 (as adjusted). He also had a $7,000 capital loss carryover to 2012. John adds the $3,000 from Schedule D, line 21, and the $7,000 carryover. He subtracts from the $10,000 result the $7,000 loss on his Schedule D, line 16, and enters $3,000 on line 2 of the worksheet.
John enters $21,100 on line 3 of the worksheet, the 2011 NOL from his 2011 Form 1045, Schedule A, line 25. Of the $33,600 negative taxable income, the $3,700 deduction for exemptions, the $3,000 capital loss deduction, and his $5,800 standard deduction were not allowed in figuring the NOL. John had a $21,100 loss on his 2011 Schedule F, the only other item on his 2011 tax return.
John enters $24,100 (the $3,000 line 2 amount plus the $21,100 line 3 amount) on line 4 and $9,500 (the $33,600 line 1 amount minus the $24,100 line 4 amount) on line 5. He enters $9,500 as a negative amount on Schedule J, line 9. He enters $6,000 on Schedule J, line 10, and a negative $3,500 on Schedule J, line 11. If he uses Schedule J to figure his tax for 2014, he will enter the negative $3,500 amount on his 2014 Schedule J as his 2011 taxable income for income averaging purposes.
taxmap/instr/i1040sj-007.htm#id2013_w25514j04
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2011 Taxable Income Worksheet—Line 9

Complete this worksheet if you did not use Schedule J to figure your tax for 2012 and your 2011 taxable income was zero or less. See the instructions above before completing this worksheet.
1.Figure the taxable income from your 2011 tax return (or as previously adjusted) without limiting it to zero. If you had an NOL for 2011, do not include any NOL carryovers or carrybacks to 2011. Enter the result as a positive amount 1. 
2.If there is a loss on your 2011 Schedule D, line 21, add that loss (as a positive amount) and your 2011 capital loss carryover to 2012. Subtract from that sum the amount of the loss on your 2011 Schedule D, line 16, and enter the result 2.   
3.If you had an NOL for 2011, enter it as a positive amount. Otherwise, enter as a positive amount the portion, if any, of the NOL carryovers and carrybacks to 2011 that were not used in 2011 and were carried to years after 2011 3.   
4.Add lines 2 and 34. 
5.Subtract line 4 from line 1. Enter the result as a negative amount on Schedule J, line 9 5.