TRW Inc. began business in 2018 and incurred net operating losses for its first two years....

TRW Inc. began business in 2018 and incurred net operating losses for its first two years. In 2020, it became profitable. The following table shows TRW’s taxable income before consideration of these NOLs.

2018

2019

2020

2021

2022

2023

2024

2025

Taxable income

$(420,000)

$(358,000)

$81,000

$41,000

$210,000

$298,000

$387,000

$905,000

	2020	2021	2022	2023	2024	2025
Tax. income before NOL deduction	81000	41000	210000	298000	387000	905000
NOL Deduction	(81000)	(41000)	(210000)	(298000)	(148000)	0
Taxable Income	0	0	0	0	239000	905000

Those are in " Bold" are right answers. Those are not in Bold are the wrong answers that was answered by one of the chegg expert.

Solutions

Expert Solution

From 2018 NEW carry over rule , carry back is eliminated for non farming loss and carry over can be made unlimited but limited to the
extent of 80% of taxable income.

	2020	2021	2022	2023	2024	2025
Tax. income before NOL deduction	$ 81,000	$ 41,000	$ 210,000	$ 298,000	$ 387,000	$ 905,000
NOL Deduction limited to 80% of taxable income	(64,800)	(32,800)	(168,000)	(238,400)	(274,000)	-
Taxable Income	$ 16,200	$ 8,200	$ 42,000	$ 59,600	$ 113,000	$ 905,000
Calculation:
2018	$ 420,000
2019	358,000
Total NOL		$ 778,000
Less: carry over to 2020 - 2023	(64,800)
	(32,800)
	(168,000)
	(238,400)	(504,000)
NOL deduction in 2024		$ 274,000


Note: I have tried my best for corret solution, still if there is any issue, please
ask in comment before posting again, Thanks.

ekkarill92 answered 1 year ago

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