TRW Inc. began business in 2018 and incurred net operating losses for its first

Question

TRW Inc. began business in 2018 and incurred net operating losses for its first two years. In 2020, it became profitable. The following table shows TRW's taxable income before consideration of these NOLS. 2018 2019 2020 2021 2022 2023 2024 2025 Taxable income $ (420,000) $ (358,000) $81,000 $41,000 $210,000 $298,000 $387,000 $905,000 Recompute TRW's taxable income for 2020 through 2025 after its allowable net operating loss deduction. 2020 2021202220232024 S 81,000 41,000 S 210,000 S 298,000 S 387,000S 905,000 2025 Tax. income before NOL deduction NOL deduction Taxable income

Explanation / Answer

The net operating losses for the first two years being ($420,000) and ($358,000) are used till they are exhausted in 2024. These NOL's can be carried forward for 20 years.

2020 2021 2022 2023 2024 2025 Tax. income before NOL deduction $81,000 $41,000 $210,000 $298,000 $387,000 $905,000 NOL deduction ($81,000) ($41,000) ($210,000) ($298,000) ($148,000) $0 Taxable income $0 $0 $0 $0 $239,000 $905,000

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