Final answer:
To determine Test Pilot's income after NOL carry forward for 2019 and the amount of NOL carry forward available for 2020, subtract the NOL carry forward amount from the total income for each year.
The correct answer is option 1) 2019 income of $4,000 and carry forward of $9,000 to 2020.
Step-by-step explanation:
To determine Test Pilot's income after NOL (Net Operating Loss) carry forward for 2019 and the amount of NOL carry forward available for 2020, we need to consider the rules for utilizing NOLs. Generally, NOLs can be carried forward to offset future taxable income. However, the annual utilization of NOLs is limited based on tax laws and regulations.
In this case, Test Pilot reported a net operating loss of $25,000 in 2018. The NOL carry forward can be used to offset taxable income in future years. To calculate the 2019 income after NOL carry forward, subtract the NOL carry forward amount from the total income for 2019. Therefore, the correct answer is option 1) 2019 income of $4,000 and carry forward of $9,000 to 2020.
The NOL carry forward available for 2020 can be calculated by considering the remaining NOL amount after offsetting the 2019 income. Since the 2019 income after NOL carry forward is $4,000 and the reported income in 2020 is $10,000, subtract $4,000 from $10,000 to find the NOL carry forward available for 2020. Therefore, the correct answer is option 2) 2019 income of $0 and carry forward of $5,000 to 2020.