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In 2020, Smith Traders Incorporated and reported a net operating loss of $100,000. In 2021, before...

In 2020, Smith Traders Incorporated and reported a net operating loss of $100,000. In 2021, before the NOL deduction, it reported taxable income of $50,000. What is Smith Traders’ 2021 taxable income after the NOL deduction and what is its NOL carryforward to 2022?

a)

$0 taxable income; $50,000 NOL Carryforward

b)

$10,000 taxable income; $60,000 NOL Carryforward

c)

$40,000 taxable income; $60,000 NOL Carryforward

d)

$50,000 taxable income; $100,000 NOL Carryforward
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Homework Answers

Answer #1

Answer :- a) $10000 Taxable Income; $60000 NOL carryforward.

Reason For above answer :-

As per the implementations of TCJA. TCJA has removed Two year carry back provision for tax period starting from Jan 1, 2018 or later on. Howerever it allows for an indefinite carryforward period. "However the carryforward loss are now subjected to 80% of the subsequent year Taxable Income.

So that's why we have Adjusted carryforward of $40000 i.e 80% of $50000, from current year taxable income. And remaining carryforward loss of $60000 shall be allowed for deduction in subsequent years.

Hope this meets your purpose. Do let me know in case of any clarification.

Do like the answer if it was helpful. Best of luck..!!

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