Question

Test Pilot, Inc. reported a net operating loss of $25,000 for its tax year ended December 31, 2019, and net income of $20,000 in 2020. After considering the NOL carryforward, Test Pilot will report 2020 taxable income of ______.

a. $0.
b. $20,000.
c. $5,000.
d. ($5,000).

Answer 1

Test Pilot, Inc. will report a taxable income of $0 for 2020 after utilizing its NOL carryforward from 2019 to offset its net income of $20,000.

Step-by-step explanation:

The question revolves around calculating the taxable income for Test Pilot, Inc. for the year 2020 after considering a Net Operating Loss (NOL) carryforward from the previous tax year. Test Pilot had a net operating loss of $25,000 in 2019 and a net income of $20,000 in 2020. The NOL carryforward allows the company to apply the loss from 2019 to offset taxable income in 2020. Therefore, after considering the NOL carryforward, Test Pilot will report 2020 taxable income of $0, as the entire 2020 net income is offset by the NOL from 2019.