[pia ach]

Morris Corporation’s income tax return for 2014 shows deductions exceeding gross income by $75,000. Included in the tax return are the following items:

Net operating loss deduction (carryover from 2013) $13,400

Dividends received deduction 6,600

What is Morris’ net operating loss for 2014?

My understanding is the $13400 is not allowed while computing the NOL, so since it is a deduction it would have been deducted in the first place to arrive at 75,000 so now we need to ADD it. However the solution says to deduct it again. Why?

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[taxgeek83]

It's not allowed in calculating the current year NOL, but after doing that you add back any unused NOL to arrive at the NOL available for carry forward to the next year. Does that make sense?

[taxgeek83]

Oh wait – I may have misread your question. I have always just figured the NOLs year by year and then added up the cumulative to get the next year's carry forward. It might be operating in positives – 75k minus the deductions not allowed in computing the NOL equals your NOL.

Does that make sense?

[pia ach]

i need to just memorize that now and hope it sticks tmrw!..thanks taxgeek.

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[taxgeek83]

Anytime – good luck!!

[pia ach]

ok i am lost now 🙂

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[taxgeek83]

Uh oh – what are you lost on? Or maybe I am thinking backwards…?!

[Author]

Replies