Daily calorie limit - gross or net

I am trying to get feedback on what most people strive for each day, their net or gross calorie limit? My calorie limit is 1200, if I still with that and exercise on top of it, it brings be down to about 800 and MyFitnessPal says it's an unhealthy #, though I feel like that's the way to lose weight, right?

I eat 1200 a day and then work out. I never eat back my exercise calories. But, that's just me. It works for me. I've lost 31lbs so I'm doing SOMETHING right.

The 1200 calorie number MFP came up with was based on your lifestyle, weight loss goals, daily activity level, etc. It's the number of calories you can safely consume and still lose weight with no additional activity level. When you exercise, you are allotted more calories, almost like freebies to go over your caloric limit. The way I look at it, so long as you don't go over your total allotted calories, you'll still lose weight. I've lost 12 pounds in about 9 weeks, and there are rarely days I remain under the original allotment, I definitely rely on my exercise calories as well.

When your calories reach a level below 1200 calories (for women) you body burns more muscle than fat. the lower the calories the more muscle it burns, including your heart muscle which is never replaced or repaired. This is known as the starvation response. I know one guy in his 20s who died of heart disease from dieting on too low calories and another who was hospitalized for several weeks for the same thing. He was 18. Personallly, I do better if I keep my calories above 1350 calories. I have never lost weight at 1200 cal. So I used to go down to 1000 cal to lose weight. But then after I reached my goal and quit dieting, my body would try to rebound after its "starvation" and I would gain all the weight back plus 20 pounds!
My registered dietition told me she never wants me to go below 1500-1600 calories. She also recommended 45% carbs, 25% fat (mostly healthy oils like fish & olive) and 30% protein. Another healthy plan is to fill 1/2 your plate with veggies, 1/4 lean protein and 1/4 carbs. Add a tsp. of oil and a small piece of whole fruit. And salt recommendations are down to 1500 mg unless you work outside in 100 degree weather.