Question

Problem 3-25 Net Operating Losses (LO 3.12) Carl has had a couple of profitable years in his new business. However, in the current year he has a net operating loss of $80,000. He does not feel that the future of his business is very bright and as such does not believe he will generate much taxable income in the future. As his tax accountant, how would you recommend Carl treat his net operating loss? Under the general rule, a net operating loss is carried back years and forward years. Since he is uncertain about future income,

Answer 1

Point to note: From year 2018 onwards carry back provision is removed for non-farming loss and only available for farming loss and carry forward is available for unlimited time. So if we considers the question in current scenario only carry forward option is available for unlimited, no limit applicable of 20 years.

Alternatively if we consider that its before 2018 time frame, than its best suited to take the NOL to 2 previous profitable years and take a refund of tax paid earlier.