Question

A net operating loss (NOL) occurs for tax purposes in a year when tax-deductible expenses exceed taxable revenues. Companies can reduce future taxable income on the amount of NOL in which of the following way?

a. must always be carried back 2 years.
b. may be carried back 2 years or carried forward up to 20 years.
c. may carry the net operating loss forward indefinitely.
d. must always be carried forward 20 years.

Answer 1

Option b=> may be carried back 2 years or carried forward up to 20 years.

Step-by-step explanation:

Net Operating Loss(NOL) just as it is given in the question, it occurs '' for tax purposes in a year when tax-deductible expenses exceed taxable revenues".

When a company experience such loss, the company or firm/ business organization will then take this loss to the following years. This will reduce the profit the company will make in the following years and most times many companies or business organization do not make "real" money so the body in charge of Internal revenue will then give the company or firm a tax relief which will make or exclude them from paying tax for that year.

Net Operating Loss(NOL) is used in the reduction of the company tax liability and it may be may be carried back 2 years or carried forward up to 20 years.