ExpertHard1 markMultiple Choice
CPA · Question 64 · Area IV: Individual Taxation
A taxpayer has a Net Operating Loss (NOL) in 2024. Which of the following statements is correct regarding the carryover of this NOL?
A taxpayer has a Net Operating Loss (NOL) in 2024. Which of the following statements is correct regarding the carryover of this NOL?
Answer options:
A.
It can be carried back 2 years and forward 20 years.
B.
It can be carried forward indefinitely, but the deduction is limited to 80% of taxable income.
C.
It can be carried forward indefinitely and offset 100% of taxable income.
D.
It can be carried back 5 years.
How to approach this question
Post-2017 NOL Rules: No Carryback (generally). Indefinite Carryforward. 80% Taxable Income Limitation.
Full Answer
B.It can be carried forward indefinitely, but the deduction is limited to 80% of taxable income.✓ Correct
Under the TCJA, NOLs arising in tax years beginning after 2017 generally cannot be carried back but can be carried forward indefinitely. The deduction is limited to 80% of taxable income (computed without the NOL deduction).
Common mistakes
Applying the old 2/20 rule or assuming 100% offset.
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