Question

Which of the following statements is incorrect with respect to the treatment of a net operating loss arising in 2022?

a. Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions.
b. The deduction for any carryover year of the NOL is limited to 80% of taxable income (determined without regard to the NOL deduction).
c. A corporation may claim a dividends received deduction in computing an NOL.
d. An NOL is generally carried back 2 years and forward 20 years.

Answer 1

Corporations can adjust their NOLs for net capital losses and nonbusiness deductions.

Step-by-step explanation:

The incorrect statement regarding the treatment of a net operating loss arising in 2022 is:

a. Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions

Corporations, unlike individuals, can adjust their NOLs for net capital losses and nonbusiness deductions. This means that corporations can offset their NOLs with capital losses and deductions that are not related to their main business activities.

This statement is incorrect. Generally, corporations are not allowed to claim a dividends received deduction when computing an NOL. The dividends received deduction is a deduction allowed for dividends received from other corporations, and it is not considered in the computation of an NOL. The treatment of NOLs and dividends received deductions are separate provisions in the tax code.