Retirement contributions and lossesQuestion Can a sole proprietor who is profitable in the current year make a contribution to a qualified retirement plan, even though there was a net operating loss carryover from a prior year?
Answer Yes. The net operating loss carry-forward does not diminish the base on which contributions to a qualified retirement plan are figured.
Contributions are based on net earnings from self-employment (essentially the same income on which self-employment tax is paid), reduced by one-half of self-employment and the contribution itself. The net operating loss carry-forward is a separate deduction on the proprietor's personal return (it is entered as a negative number on the "Other Income" line of Form 1040). 
Brain Trust contributor:
Author of J.K. Lasser's Small Business Taxes 2007
Related Categories: Accounting, Finance, Taxes, Retirement And Exit Strategies
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