For this tax year,Madison Corporation had taxable income of $80,000 before using any of the net operating loss from the previous year.Madison has never elected to forgo the carryback of its losses since incorporation five years ago.Madison's books and records reflect the following income (loss)since its incorporation. What amount of taxable income (loss)should Madison report on its current tax return?

Question

For this tax year,Madison Corporation had taxable income of $80,000 before using any of the net operating loss from the previous year.Madison has never elected to forgo the carryback of its losses since incorporation five years ago.Madison's books and records reflect the following income (loss)since its incorporation.  What amount of taxable income (loss)should Madison report on its current tax return?

Quizplus · Accepted Answer

B)The $35,000 NOL from four years ago offsets $20,000 of the income from 5 years ago.The remaining $15,000 loss is carried forward.Of that,$10,000 of the loss is used to offset the $10,000 from 3 years ago and the remaining $5,000 loss is carried forward.That $5,000 loss offsets $5,000 of the $25,000 income from 2 years ago leaving $20,000 income.Last year's $35,000 loss is carried back and offsets that $20,000,leaving $15,000 of the NOL to be offset by this year's income.Thus,the income reported is $80,000 - $15,000 = $65,000.

For This Tax Year,Madison Corporation Had Taxable Income of $80,000