Provide chronological analysis of Tyler's treatment of NOLs through 2021 and report NOL carry forward into 2022.
Provide chronological analysis of Tyler's treatment of NOLs through 2021 and report NOL carry forward into 2022.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 5DQ
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Tyler, a taxpayer, generates business income of $3000 in 2016. In 2017 he generates an NOL of $2000. In 2018 he incurs another NOL of $5000. In 2019 he generates a modest business income of $6000 and then in 2020 the COVID-19 pandemic results in an NOL of $13,000. In 2021 Tyler's business generates income of $13000. Assume that in all years Tyler adopts the NOL treatment that results in the earliest and greatest refund. Provide chronological analysis of Tyler's treatment of NOLs through 2021 and report NOL carry forward into 2022.
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Transcribed Image Text:Problem 4-13
Net Operating Losses (LO 4.9)
Tyler, a single taxpayer, generates business income of $3,000 in 2016. In 2017, he generates an NOL of $2,000. In 2018, he incurs another NOL of $5,000. In 2019, he generates a modest business income of $6,000 and then in 2020, the COVID-19 pandemic results in an NOL of
$13,000. In 2021, Tyler's business generates income of $13,000. Assume that in all years, Tyler adopts the NOL treatment that results in the earliest and greatest refund. Provide a chronological analysis of Tyler's treatment of NOLS through 2021 and report any NOL carryforward
into 2022.
In 2017, Tyler carries back
✔his $2,000 NOL against his 2016
✔income leaving $
1,000
✓ of 2016 income.
In 2018, Tyler carries forward
✓the NOL to 2019
✓
In 2019, Tyler can offset 80%
✓of his 2019 income with the 2018
✔NOL and he has a $
200 ✓carryforward from 2018
✓.
In 2020, the COVID-19 provisions allows him to carryback $ 1,000 ✓to 2016 ✓ He can now use all of the remaining 200✔ 2018 loss against the 2019 income and then can use another $ 1,000✔ of 2020 NOL against the remaining 2019 income.
The remaining $ 9,000 X NOL from 2020 may be carried forward into 2021. After 2020, NOLs are subject to the 80% income limitation. Tyler will be able to use $ 4,000 X in 2021 and have a $ 13,000 X NOL to carryforward into 2022.
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