Asked by Karren Shaalini Gunalan on May 22, 2024
Verified
An operating loss carryforward occurs when
A) prior pretax financial income is insufficient to offset the current period operating loss
B) prior taxable income is insufficient to offset the current period operating loss
C) future pretax financial income is insufficient to offset a current period operating loss
D) future taxable income is insufficient to offset a current period operating loss
Operating Loss Carryforward
A tax provision that allows businesses to apply current year's operating losses to future profits for tax relief.
Taxable Income
Income of an individual or corporation subject to tax by governmental authorities.
Financial Income
Income generated through investments or other financial instruments, distinct from operational or business income.
- Ascertain the income tax expense or advantage linked to operating losses.
Verified Answer
VN
Vignesh NarayananMay 25, 2024
Final Answer :
B
Explanation :
An operating loss carryforward occurs when prior taxable income is insufficient to offset the current period operating loss. This means that a company has a net operating loss in a given year and is allowed to use that loss to offset taxable income in future years. However, the company can only carry forward the loss for a certain period of time as determined by tax laws.
Learning Objectives
- Ascertain the income tax expense or advantage linked to operating losses.