\Homework Answers
According to CARES Act for the years beginning after 31st December 2017, if there is a loss in a year that can be carried back for 5 years and any remaining loss can be carry forward for future years. But CARES Act limits these benefits for the years beginning before 1st January 2021.
In the given question, the year of loss is 2022. So the CARES Act would not apply and only Tax Cuts and Jobs Act (TCJA) will apply. As per TCJA, no Carryback of losses will be allowed and also the losses can be carried forward to unlimited number of years. There is a limit of claiming these carried forward losses only upto 80% of total income of those years.
Operating Loss before income tax = ($220,000)
Tax refund from NOL Carryback = 0
Tax refund from NOL Carryforward = $440,000
($2,200,000 x 20%)
Net Loss (Loss - Carryforward) = (1,760,000)
Note :
Carryback of losses is not allowed as per TCJA. Also there is no limitation on number of years to be carried forward, so 80% of respective years total income limit will not effect total loss carried forward. Assuming that the 20% tax rate will remain same for coming years.
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Wynn Farms reported a net operating loss of $250,000 for financial reporting and tax purposes in...
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first four years of operation were as follows:
Taxable
Income
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Rates
Income Taxes
Paid
2017
$
78,000
30
%
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2018
88,000
30
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fore farms reported a pretax operating loss of $137 million for
financial reporting purposes in 2021. Contributing to the loss were
a penalty of $5 million assessed by the environmental protection
agency for violation of a federal law and paid in 2021, and b.) an
estimated loss of $12 million from accruing a loss contingency. The
loss will be tax deductible when paid in 2022. The enacted tax rate
is 25%. There were no temporary differences at the beginning of...
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Wynn Farms reported a net operating loss of $250,000 for
financial reporting and tax purposes in 2021. The enacted tax rate
is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s
first four years of operation were as follows:
Taxable
Income
Tax
Rates
Income Taxes
Paid
2017
$
78,000
30
%
$
23,400
2018
88,000
30
26,400
2019
170,000
40
68,000
2020
40,000
45
18,000
Required:
1. NOL carrybacks are not allowed for most
companies, except for property...
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