Question

A taxpayer should attempt to _________________________. The more years to which the NOL is applied, the more benefits are lost from adjustments for items such as personal and dependency exemptions.

Answer 1

Taxpayers should carry forward an NOL to maximize tax benefits, but spreading it over too many years can lead to diminished benefits due to adjustments like personal exemptions.

Step-by-step explanation:

A taxpayer should attempt to carry forward a net operating loss (NOL) as far as possible. The implication here is that spreading the NOL over more years can lead to diminished tax benefits due to the loss of value for certain tax adjustments, such as personal and dependency exemptions.

To maximize the tax benefits from an NOL, tough it may be strategically beneficial to use it in years where the taxable income is higher, ensuring the tax reduction is at the taxpayer's highest marginal rate.

Taxpayers should carry forward an NOL to maximize tax benefits, but spreading it over too many years can lead to diminished benefits due to adjustments like personal exemptions.