Question

In 2019 Hill Corporation reported a net operating loss of $10,300 that it carried forward to 2020. In 2019 Hill also reported a net capital loss of $4,200 that it carried forward to 2020. In 2020, ignoring any carryovers from other years, Hill reported a loss for tax purposes of $58,500. The current-year loss includes a $12,700 net capital gain. What is Hill’s 2020 net operating loss?

Answer 1

Hill’s 2020 net operating loss is $62,700

Step-by-step explanation:

The computation of the net operating loss is shown below:

= Tax purpose loss + net capital gain - difference of net capital loss and net capital gain

= $58,500 + 12,700 - $8,500

= $62,700

The difference between net capital gain and net capital loss is shown below:

= $12,700 - $4,200

= $8,500

For computing the net operating loss, we add the net capital gain and deduct the difference to the tax purpose losses