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Unformatted text preview: S corporations.
Trusts and estates.
Not-for-profit organizations. CPA-05281
RULE: A Net Operating Loss (NOL) exists if there is a net loss on the following tax returns:
• Form 1040, Line 41 for Individuals • Form 1041, Line 22 for Estates and Trusts • Form 1120, Line 28 for Taxable C Corporations A net operating loss exists on tax returns of taxable entities.
Choice "c" is correct. Per the above rule, trusts and estates are entitled to a net operating loss deduction.
Trusts and estates can be taxable entities, even though, at times, they may also have pass-through
Choice "a" is incorrect. Partnerships are pass-through entities; thus, they do not pay tax at the entity
level. Therefore, NOLs are not allowed at the partnership level. [Note: If the partnership has a passthrough loss, however, an NOL may exist, for example, on the personal tax return of an individual
Choice "b" is incorrect. S corporations are pass-through entities; thus, they do not pay tax at the entity
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.
- Fall '10
- The Land