A Taxpayer Incurs a Net Operating Loss in the Current

question 57

Multiple Choice

A taxpayer incurs a net operating loss in the current year. With respect to the application of the NOL,

• A) the taxpayer will carry back the NOL three years first, then carry forward any balance for five years.
• B) the taxpayer will first carry back the NOL for two years, then carry forward the balance for a period of 20 years, or the taxpayer can elect to only carry forward the loss for the 20- year allowable period.
• C) the taxpayer must carry forward the loss and has up to 20 years to use it.
• D) the taxpayer can carry forward the loss indefinitely until there is sufficient taxable income to use it up.

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Definitions:

Bilingualism

The ability to fluently speak and understand two languages, which can influence cognitive processes and neurological structure.

Cognitive Error

A systematic pattern of deviation from norm or rationality in judgment, often leading to inaccurate conclusions or perceptions.

Heuristics

Cognitive shortcuts or rules of thumb that simplify decision making by enabling quicker judgments with less effort but potentially at the expense of accuracy.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person’s mind when evaluating a specific topic, concept, method, or decision.