In which of the following situations would Bob elect to waive the NOL carryback?
ID: 2601977 • Letter: I
Question
In which of the following situations would Bob elect to waive the NOL carryback? *
Bob has a 2015 NOL of $45,000. In 2013 and 2014, he was in the 28% tax bracket and received a substantial refund of $8,000 where the NOL was fully used and there was no carry over. However, if Bob makes the election and carries forward, he anticipates being in the 15% tax bracket in 2016 through 2020, receiving an estimated $6,000 total refund. Bob wants to receive the best advantage possible when deducting his NOL.
Bob has a 2015 NOL of $65,000. In 2013 and 2014, he was in the 25% tax bracket and received a substantial refund of $10,000. He expects to be in the 10% tax bracket from 2016 through 2020, in which he would receive a refund of $5,500. Bob wants to receive the best advantage possible when deducting his NOL.
Bob has a 2015 NOL of $30,000. In 2013 and 2014, he was in the 10% tax bracket. If Bob carries back his NOL, he will zero out his 2013 and 2014 AGI, which in turn reduces the earned income tax credit he received in 2013 and 2014. However, Bob anticipates being in the 28% tax bracket in 2016, receiving an estimated $5,000 refund where the NOL will be fully used up with no carryover. Bob wants to receive the best advantage possible when deducting his NOL.
Bob has a 2015 NOL of $50,000. In 2013 and 2014, he was in the 15% tax bracket. He anticipates being in the 25% tax bracket in 2016. Regardless of tax savings, he needs cash in hand to either purchase business inventory, pay fixed costs, or cover business expenses to keep the doors open.
Explanation / Answer
Effect of carrying back NOL
Bob 1# Bob has a 2015 NOL of $65,000. In 2013 and 2014, he was in the 25% tax bracket and received a substantial refund of $10,000. He expects to be in the 10% tax bracket from 2016 through 2020, in which he would receive a refund of $5,500. Bob wants to receive the best advantage possible when deducting his NOL NOL 2015 65000 Tax bracket 2013 25% 2014 25% Refund received $ 10000 Expected tax bracket Expected refund($) 2016 10% 5500 2017 10% 5500 2018 10% 5500 2019 10% 5500 2020 10% 5500 Total 27500 Whereas Bob received only $ 10000 as a reund he expects an aggregate refund of 27500 if he declares his NOL now. He would declare his NOL now. 2 # Bob has a 2015 NOL of $30,000. In 2013 and 2014, he was in the 10% tax bracket. If Bob carries back his NOL, he will zero out his 2013 and 2014 AGI, which in turn reduces the earned income tax credit he received in 2013 and 2014. However, Bob anticipates being in the 28% tax bracket in 2016, receiving an estimated $5,000 refund where the NOL will be fully used up with no carryover. Bob wants to receive the best advantage possible when deducting his NOL. NOL 30000Effect of carrying back NOL
AGI 2013 0 2014 0 Earned Income Tax Credit 10000 2013 2014 Loss of Income Tax Credit 10000 Anticipated Income Tax bracket 2016 28% Loss on full surrender of Income Tax Credit 4998 Expected income (2016) 17850 Expected Income Tax Refund 5000 Bob will surrender his full NOL of 30000 when his annual income is $ 17850 approx 3 # Bob has a 2015 NOL of $50,000. In 2013 and 2014, he was in the 15% tax bracket. He anticipates being in the 25% tax bracket in 2016. Regardless of tax savings, he needs cash in hand to either purchase business inventory, pay fixed costs, or cover business expenses to keep the doors open. Tax bracket 2013 15% 2014 15% Anticipated tax bracket 2016 25% Cash generated by the full surrender of NOL 50000 Since Bob needs cash urgently, he will surrender his NOL in full.