Question

Killian Corporation frequently loses money and has a net operating loss carried forward of $500 million. It expects to generate $1.5 billion in taxable income next year. The tax rate is 30%. How much will Killian pay in taxes next year?

Answer 1

Killian Corporation will not pay any taxes next year because it has a net operating loss carried forward.

Step-by-step explanation:

Killian Corporation will not pay any taxes next year because it has a net operating loss carried forward. A net operating loss (NOL) occurs when a company's deductible expenses exceed its taxable income. In this case, Killian Corporation has a net operating loss of $500 million. When a corporation has an NOL, it can carry it forward to future years and use it to offset future taxable income. Since Killian Corporation expects to generate $1.5 billion in taxable income next year, it can use the NOL carried forward to offset this income and reduce its tax liability to zero. Therefore, Killian Corporation will not pay any taxes next year.