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Instructions for Schedule J (Form 1040)
taxmap/instr/i1040sj-009.htm#en_us_publink1000274220

Line 13(p11)

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If you used Schedule J to figure your tax for 2011 (that is, you entered the amount from the 2011 Schedule J, line 23, on line 44 of your 2011 Form 1040, on line 42 of your 2011 Form 1040NR, or on Form 1040X for 2011), enter on line 13 the amount from your 2011 Schedule J, line 3.
If you did not use Schedule J to figure your tax for 2011, enter on line 13 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 13.
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, 2013 (or the date you file your 2012 tax return, if later).
taxmap/instr/i1040sj-009.htm#en_us_publink1000274221

Instructions for 2011 Taxable Income Worksheet(p11)

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taxmap/instr/i1040sj-009.htm#en_us_publink1000274222
Line 2.(p11)
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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.
taxmap/instr/i1040sj-009.htm#en_us_publink1000274223
Line 3.(p11)
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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-009.htm#en_us_publink1000274224
Example.(p11)
John Farmington did not use income averaging for 2009, 2010, or 2011. The taxable income before subtracting exemptions on his 2011 Form 1040, line 41, is a negative $1,000. This amount includes an NOL deduction on his 2011 Form 1040, line 21, of $1,500. The $1,500 is the portion of the 2010 NOL that was remaining from 2009 to be carried to 2011. See the examples, earlier. A deduction for exemptions of $3,700 is shown on Form 1040, line 42, and line 43, taxable income, is limited to zero. John does not have an NOL for 2011. John subtracts from the $1,000 negative amount on Form 1040, line 41, the $3,700 deduction for exemptions. The result is a negative $4,700, 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), a $7,000 loss on Schedule D, line 16, and a $5,000 capital loss carryover to 2012 (his 2011 capital loss carryover to 2012 was $5,000, not $4,000, because the amount on his Form 1040, line 41, was a negative $1,000). John adds the $3,000 from Schedule D, line 21, and the $5,000 carryover. He subtracts from the $8,000 result the $7,000 loss on his Schedule D, line 16, and enters $1,000 on line 2 of the worksheet.
John enters -0- on line 3 of the worksheet because he does not have an NOL for 2011 and did not have an NOL carryover from 2011 available to carry to 2012 and later years. The NOL deduction for 2011 of $1,500 was reduced to zero because it did not exceed his modified taxable income of $3,500. Modified taxable income is figured by adding back the $3,000 net capital loss deduction and the $3,700 exemption deduction to negative taxable income (figured without regard to the NOL deduction) of $3,200. John enters $1,000 on line 4 and $3,700 on line 5. He enters $3,700 as a negative amount on Schedule J, line 13. He enters $6,000 on Schedule J, line 14, and $2,300 on Schedule J, line 15. If he uses Schedule J to figure his tax for 2013, he will enter $2,300 on his 2013 Schedule J as his 2011 taxable income for income averaging purposes.
taxmap/instr/i1040sj-009.htm#en_us_publink1000274238
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2011 Taxable Income Worksheet—Line 13

Complete this worksheet if 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 13 5.