R1 M3 - Gross Income: Part II

Question 1

Excess Business loss limitation rules?

• Net operating loss (NOL) before 2018
• Net operating loss (NOL) after 2017
• Net operating loss (NOL) starting 2021

Answer 1

• Net operating loss (NOL) before 2018
  Carryforward - 100% of future taxable income for just 20 years.
• Net operating loss (NOL) after 2017
  Carry forward - forever (indefinitely)
  100% of taxable income 2019 and 2020,
• Starting in 2021
  Any net loss can’t be carried back but can be carried forward forever.
  Only 80% offset

Question 2

Hunter has a loss of $50,000 from his landscaping business in 2024. He reports the loss on Schedule C of his Form 1040. After deducting the loss against his other sources of income, he has a remaining business loss of $10,000. What are Hunter’s options regarding the remaining $10,000 business loss?

A.	He can carry the loss back five years and forward 20 years.

B.	He can carry the loss back two years and forward 20 years.

C.	He cannot carry the loss back but he can carry it forward indefinitely.

D.	He can carry the loss back five years and forward indefinitely.

Answer 2

Explanation
Choice “C” is correct. For tax years beginning after December 31, 2020, a net operating loss cannot be carried back but can be carried forward indefinitely.

Choice’s “A”, “B”, and “D” are incorrect. These are different carryback and carryforward provisions for tax years before 2021.