ExpertHard1 markMultiple Choice
CPA · Question 42 · Area V: Entity Taxation
Which of the following statements is correct regarding the Net Operating Loss (NOL) rules for C corporations for tax years beginning after 2020?
Which of the following statements is correct regarding the Net Operating Loss (NOL) rules for C corporations for tax years beginning after 2020?
Answer options:
A.
NOLs can be carried back 2 years and forward 20 years.
B.
NOLs can offset 100% of taxable income in future years.
C.
NOLs can be carried forward indefinitely but are limited to 80% of taxable income.
D.
NOLs expire after 20 years.
How to approach this question
Current NOL Rule: No Carryback. Indefinite Carryforward. 80% Income Limit.
Full Answer
C.NOLs can be carried forward indefinitely but are limited to 80% of taxable income.✓ Correct
C
For tax years arising after Dec 31, 2017, the TCJA eliminated the 2-year carryback (except for farms/insurance) and allows indefinite carryforwards. However, the deduction is limited to 80% of taxable income (for years after 2020).
Common mistakes
Applying the old 2/20 rule or the 100% offset rule.
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