Corporation VB’s tax returns for 2012, 2013, and 2014 provide the following information:
a. On the basis of the above data, did VB derive any tax benefit from its 2012 NOL? Explain your conclusions.
b. VB generated a $350,000 net operating loss for 2015. It projects that it will continue to operate at a loss through 2016 but should generate at least $1 million taxable income in 2017. On the basis of this projection, compute the net present value of the tax savings from VB’s deduction of the 2015 NOL, assuming that VB deducts it as a carryback and carryforward to the extent possible. In making your calculations, refer to the corporate tax rate schedule to compute VB’s tax in 2013 and 2014 and use a 5 percent discount rate to compute NPV.
c. Should VB elect to give up the carryback of its 2015 NOL and use the entire NOL as a carryforward deduction? Support your conclusion with calculations.

  • CreatedNovember 03, 2015
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