Question

Test Pilot, Inc. reported a net operating loss of $25,000 for its tax year ended December 31, 2018. Test Pilot reported income of $20,000, $10,000 and $8,000 in 2019, 2020, and 2021, respectively. What is Test Pilot's 2019 income after NOL carry forward and the amount of NOL carry forward available for 2020?

Answer 1

What is Test Pilot's 2019 income after NOL carry forward?

• $20,000

What is Test Pilot's 2019 amount of NOL carry forward available for 2020?

• $5,000

Step-by-step explanation:

Test Pilot's net income after taxes for 2019 = net income - (net income - NOL carry forward) = $20,000 - [$20,000 - $20,000 (NOL carry forward cannot exceed income)] = $20,000 - $0 = $20,000

Carry forward for 2020 = total NOL carry forward - NOL carry forward used for 2019 income = $25,000 - $20,000 = $5,000

Answer 2

Net income after operating loss for 2019 is equal to $0 dollars and amount of net operating loss carried forward available in 2020 is equal to $5000.

Step-by-step explanation:

Net loss is not deductible in the current year but can however be carried forward to the subsequent year and deducted against income in that year. Therefore the loss can only be deducted from 2019 on wards. The remainder of the net loss after deducting against 2019 income will be carried over into the subsequent year and therefore $5000 is carried forward to the year 2020.