Question

Which statement is incorrect with respect to the treatment of net operating losses by corporations? 1....

Which statement is incorrect with respect to the treatment of net operating losses by corporations?

1. A corporation may claim dividends received deduction in computing an NOL.

2. A corporation may elect to forgo the carryback period, and just carry forward an NOL.

3. Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions.

4. An NOL is generally carried back 2 years and forward 20 years.

5. None of the above

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Answer #1

1. A corporation may claim dividends received deduction in computing an NOL. - Correct (Only corporation may claim this deduction, plus there is no taxable income limitation as it is NOL)

2. A corporation may elect to forgo the carryback period, and just carry forward an NOL. - Correct (Limits to certain kinds of income like farming. Plus once forgon its irrevocable)

3. Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions. - Correct (since corporations cannot deduct net capital losses)

4. An NOL is generally carried back 2 years and forward 20 years. - Correct (There is no further explanation needed)

5. None of the above - Answer

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