Final answer:
A Deferred Tax Asset created by NOL carryforward is a tax benefit allowing companies with net operating losses to offset future taxable income. It corresponds to option 1, representing the potential reduction in future income taxes payable as the company can use these losses to lower tax liabilities in future periods.
Step-by-step explanation:
The Deferred Tax Asset created by Net Operating Loss (NOL) carryforward is a tax benefit that arises when a company has net operating losses. These losses can be used to reduce future taxable income, which results in a lower tax liability in those future years. Specifically, it refers to option 1: A tax benefit that arises when a company has net operating losses (NOLs) that can be used to offset future taxable income. Deferred Tax Assets are recognized in a company's financial statements for these net operating losses. They represent the potential reduction in future income taxes payable.
Corporate taxes are generally imposed on the net profits of a company, and the rate of tax varies by jurisdiction. Companies can use NOLs to reduce their taxable income subject to these corporate taxes. While a company must adhere to local and state taxation laws, certain strategies, including adopting new technologies, may be pursued to manage tax liabilities.