Question

Determine taxable income in each of the following independent cases. In all cases, the company was very profitable in all years prior to 2017 and it had retained earnings of $1,000,000 at the end of 2017.

1. In 2018, Company A has taxable income of $60,000 prior to consideration of any net operating loss. In 2017, the Company incurred a net operating loss of $10,000. They did not elect to waive the carryback period. Determine 2018 taxable income.
2. In 2018, Company B has taxable income of $50,000 prior to consideration of any net operating loss. In 2017, the Company incurred a net operating loss of $20,000. They elected to waive the carryback period. Determine 2018 taxable income.
3. In 2019, Company C has taxable income of $35,000 prior to consideration of any net operating loss. In 2018, the Company incurred a net operating loss of $30,000. Determine 2019 taxable income.
4. In 2019, Company D has taxable income of $35,000 prior to consideration of any net operating loss. In 2017, the Company incurred a net operating loss of $5,000. They elected to waive the carryback period. In 2018, the Company incurred a net operating loss of $40,000. Determine 2019 taxable income.

Answer 1

CASE (1) :TAXABLE INCOME OF COMPANY A IN 2018  IS 50,000(60000-10000).BECAUSE THE COMPANY HAS NOT ELECTED TO WAIVE BACK PERIOD.THEREFORE PAST LOSSES CAN BE ADJUSTED.

CASE(2) :TAXABLE INCOME OF COMPANY B IN 2018 IS 50000.BECAUSE THEY ELECTED TO WAIVE THE CARRYBACK PERIOD.THAT MEANS THE LOSS OF 2017 IS ADJUSTED IN FUTURE YEARS.

CASE(3) :TAXABLE INCOME OF COMPANY C IN 2019 IS 5000.BECAUSE PAST LOSS OF 30000 (2018 LOSS) CAN BE ADJUSTED AGAINST CURRUNT PROFIT OF 35000(2019 PROFIT).

CASE(4) : TAXABLE INCOME OF COMPANY D IN 2019 IS 0.BECAUSE THEY ELECTED TO WAIVE THE CARRY BACK PERIOD. THAT MEANS THE LOSS OF 2018 IS ADJUSTED IN FUTURE YEARS.