4.6 - NOLs & Capital Loss Limitations

Question 1

Corporations that have NOLs that arise before 2017 are carried back how many years and forward how many?

Answer 1

Back 2 and forward 20

Question 2

Corporations that have NOLs that arise after 2017 and before 2021 are carried back how many years and forward how many?

Answer 2

Back 5 and forward indefinitely

Question 3

Corporations that have NOLs that arise after 2020 are carried back how many years and forward how many?

Answer 3

Back 0 forward indefinitely

Question 4

How much of a corporate net capital loss can offset other income? Also, how many years can a net capital loss be carried back or forward?

Answer 4

0 amount can be offset against other income
Back 3 years and forward 5 years

Question 5

How much of a individual net capital loss can offset other income? Also, how many years can a net capital loss be carried back or forward?

Answer 5

$3,000 can be offset against other income
Back 0 years and forward indefinitely

Question 6

Corporate NOLs that are carried forward between the years 2018-2020 can offset what amount of taxable income? Corporate NOLs that are carried forward after 2020 can offset what amount of taxable income?

Answer 6

100% and 80%

Question 7

Johnson corporation is a calendar year corporation that began in 2017. The corporation has a 2020 NOL of $40,000. Taxable income in 2017, 2018, 2019, 2021, and 2022 is $10,000 each year. The corporations marginal tax rate was 34% in 2017 and 21% in 2018-2022. Calculate the amount of tax refund from its NOL carrybacks to 2017, 2018, and 2019. Calculate the amount of the NOL carryforward to 2021 and 2022. Calculate the amount of the NOL deduction in 2021 and 2022.

Answer 7

10,000 X 34% = 3,400 carryback to 2017
10,000 X 21% = 2,100 carryback to 2018
10,000 X 21% = 2,100 carryback to 2019
Total refund = 7,600 for carrybacks

40,000 NOL - 30,000 carried back = 10,000 carry forward to 2021
10,000 X 80% = 8,000 deduction in 2021
10,000 - 8,000 = 2,000 carryforward and deduction in 2022

Question 8

A corporation can only use capital losses to offset what?

Answer 8

Capital gains

Question 9

Lane corporation has gross income of $400,000 including $150,000 and operating expenses of $500,000. Lane corporation has an unexpired capital loss carryover of $20,000. Determine lane corporation’s NOL.

Answer 9

400,000 - 150,000 = 250,000 ordinary income

150,000 - 20,000 carryover = 130,000 capital gain

130,000 + 250,000 = 380,000 - 500,000 = 120,000 NOL