In 2020, Ace Corporation reports gross income of $200,000 (including $150,000 of profit from its operations...

In 2020, Ace Corporation reports gross income of $200,000 (including $150,000 of profit from its operations and $50,000 in dividends from less-than-20%-owned domestic corporations) and $230,000 of operating expenses.

A. What is Ace’s NOL for 2020

B. Assume that Ace expects 2021’s taxable income to be $20,000 and 2022’s taxable income to be $100,000, both before any NOL deduction in the carryover year. What NOL deductions can Ace expect to claim in 2021 and 2022

C. How would your answer to Part b change if, in addition to the 2020 NOL, Ace also had a $5,000 NOL carryover from a loss occurring before 2018?

Solutions

Expert Solution

A.	Year of Reporting of Filing Returns
	2020
	Operating Income / Income from Business and Profession	150000
	Income from Other Sources / Dividend	50000
	Operating Losses:	230000
	Hence Income from PGBP	-80000
	Applying General Rule fo Set off And Carry forward Principle
	Hence Net Loss Reported in Tax Return is 30000, as Set off against Income from Other Sources
B.	2021	20000
	2022	100000
	Year	Net O Income	Deduction / Set off	Carryforward
	2021	20000	-30000	-10000
	2022	100000	-10000	90000

C.	Year	Net O Income	Deduction / Set off	Carryforward
	2021	20000	-30000	-15000
	2022	100000	-15000	85000
	Here, as per Taxation Principle carryforward is applicable for maximum period of 8 Years and if it is assumed that such loss incurred before 2018 and where in 2020 itself maximum period of carryover completed then such loss shall be debarred from Carryforward and no need to set ff agaisnt the same.

ekkarill92 answered 1 year ago

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