Turn A Loss Into A Win

            Did your stock photo business lose money this year? Perhaps you’re just starting out in the stock photography field, or maybe your business just had a bad year in 2000.

            IRS Section 172 permits a business that suffers a net operating loss (or NOL--tax jargon for when expenses exceed income) to carry that loss back to previous years or forward to upcoming years.

            Use your current business downturn to offset business profits or other kinds of income that you had the two previous years. This will generate a refund for you. This will prove helpful when cash is tight.

            Also, if there is NOL leftover, use the "carry forward" mentioned above to apply the unused NOL against profits in the years ahead.

            Or, you can skip the carry back, and simply carry forward the entire NOL for the future year(s).

            Example: Your bottom line is red for 2000, and 1999 and 1998 were low-income years. By electing to forgo a carry back of the NOL for 1999, you should come out ahead, assuming you can use up the NOL during the carryforward years that begin in 2001.

            You have ample time to assess your tax situation for 2000 and decide whether to carry forward an NOL. The deadline is not until the due date for filing your 2000 return.

            One disadvantage: a refund claim might prompt the IRS to question not only your return for the loss year, but also to look at returns for earlier years.

Julian Block, a former IRS agent and tax attorney, is the author of "Julian Block's Tax Avoidance Secrets" ($29.95 p&h included, 560 pgs. Mention you are a PhotoStockNotes subscriber and receive the book for $19.95. Julian Block, 3 Washington Sq, Larchmont NY 10538-2032). For Julian's tax saving and tax planning reports, go to http://www.photosourcefolio.com/TaxReports.htm . Julian can be reached at julianblock@yahoo.com.

Ref: IRS Publication 536. Net Operating Losses. (800) TAX-FORM; http://www.irs.ustreas.gov