Ladow Inc. incurred a $32,000 net operating loss in 2020. If Ladow's 2021 taxable income was $38,000 before NOLs, compute Ladow's 2021 NOL deduction.

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Quizplus · Accepted Answer

The NOL deduction for the current year is limited to 80% of taxable income before the NOL deduction. Therefore, Ladow Inc. can only deduct up to 80% of its $38,000 taxable income in 2021, which is $30,400 (0.8 x $38,000). Any remaining NOL balance can be carried back or carried forward as a deduction in future tax years.

Ladow Inc Incurred a $32,000 Net Operating Loss in 2020