Question

Which of the following statements regarding net operating losses generated in 2020 is true? A) A corporation can carry NOLs back two years and forward indefinitely. B) When a corporation applies a net operating loss carryover, it reports a favorable, permanent book–tax difference in the amount of the applied carryover. C) Corporations can carry NOLs back two years and forward up to 20 years. D) A corporation can carry over the NOL indefinitely. E) None of these is a true statement.

Answer 1

A corporation can carry over the NOL indefinitely

Step-by-step explanation:

A net operating loss occurs when a companies tax payment exceeds its taxable income. Companies make this excess payment to offset future tax liabilities.

For example farms can generate much profit this year, but next year when they are offseason profits will be low. A NOL can be used to settle next year's tax liability.

After 2018 corporations can now carry forward NOL indefinitely as far as the NOL is not greater than 80% of previous year's income.

Before 2018 Corporations can carry NOLs back two years and forward up to 20 years.

Answer 2

D) A corporation can carry over the NOL indefinitely.

Explanation:

A net operating loss (NOL) can said to exists in a situation where a company's or organization deductions exceed their taxable income and A NET OPERATING LOSS can as well help benefit a company by trying to reduce their taxable income in the future which is why NOLs may now be carried forward indefinitely until such loss is fully recovered, Although they are said to be limited to only 80% of that taxable income in any one tax period which is why these NOLs can be carried forward indefinitely instead of them been limited to only 20 years.