R3 M4 - Calculating Loss Limitation for C Corporation

Question 1

NOL Carry forward from pre-2018 tax years can offset 100% of a future year’s taxable income.

NOL Carryforward from Post 2017 tax years can offset 100% of taxable income in 2018, 2019, and 2020.

Starting 2021, any NOL carry forward from post 2017 tax years can only offset 80% of the future year’s taxable income after deducting Pre-2018 NOL Carryforwards.

Answer 1

Question 2

Answer 2

Choice “B” is correct. The NOL incurred in 2019 can be carried back five years and carried forward indefinitely. There is no taxable income limitation for tax years prior to 2021.

Choice “A” is incorrect. The 80 percent of taxable income limitation applies only to post-2017 NOLs carried forward to taxable years beginning in 2021 or later.

Choice “C” is incorrect. If the company elects not to carry back, the company can offset all of 2020 taxable income, with the remaining NOL carried forward to 2021 and succeeding periods.

Choice “D” is incorrect. The NOL incurred in 2019 can be carried back five years and the 80 percent of taxable income limitation applies only to post-2017 NOLs carried forward to taxable years beginning in 2021 or later.

Question 3

Question 4

LP, Partnership, S Corp, General Partnership are pass through or flow through entities, they do not pay tax at the entity level.

Only C Corporation are taxed at the entity level.