EXHIBIT 16-6 Net Operating Loss Carryback and Carryover Summary* \begin{tabular}{|c|c|c|} \hline Tax Year NOL Originated & Carrybacks & Carryovers \\ \hline Beginning before 2018 & \begin{tabular}{l} Back two years. ** Can offset 100% of taxable income before the \\ NOL deduction in carryback years. \end{tabular} & \begin{tabular}{l} Forward 20 years. Can offset 100% of taxable income before the \\ NOL deduction. \end{tabular} \\ \hline Beginning after 2017 and before 2021 & \begin{tabular}{l} Back five years.* Can offset up to 100% of taxable income \\ before the NOL deduction in carryback years. \end{tabular} & \begin{tabular}{l} Carried forward indefinitely. Can offset up to 100% of taxable \\ income before the NOL deduction in tax years beginning before \\ 2021 . In tax years beginning after 2020 , can offset up to 80 \\ percent of taxable income after deducting NOL carryovers from \\ NOLs originating in tax years beginning before 2018 . \end{tabular} \\ \hline Beginning after 2020 & Not allowed. & \begin{tabular}{l} Carried forward indefinitely. Can offset up to 80 percent of \\ taxable income remaining after deducting NOL carryovers from \\ NOLs originating in tax years beginning before 2018 . \end{tabular} \\ \hline \end{tabular} e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties. Note: Round "Annualization Factor" for Fourth quarter to 2 decimal places. XYZ is a calendar-year corporation that began business on January 1,2022 . For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6. 1. XYZ owns 30% of the outstanding Hobble Corporation ( HC ) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC 's earnings. 2. Of the $28,800 interest income, $7,200 was from a City of Seattle bond, $9,200 was from a Tacoma City bond, $8,200 was from a fully taxable corporate bond, and the remaining $4,200 was from a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as $1231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6. XYZ actually wrote off $32,500 of its accounts receivable as uncollectible. 7. Tax depreciation was $2,175,000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $500,000 of cash contributions to charities during the year 10. On July 1 of this year, XYZ acquired the assets of another business. In the process, it acquired $333,000 of goodwill. At the end of the year, XYZ wrote off $35,500 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences. 13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $440,000 ( $110,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2022 and that in 2022 it reported a tax liability of \$612,000. During 2023, XYZ determined its taxable income at the end of each of the first three quarters as follows: Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount. e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties. Note: Round "Annualization Factor" for Fourth quarter to 2 decimal places. EXHIBIT 16-6 Net Operating Loss Carryback and Carryover Summary* \begin{tabular}{|c|c|c|} \hline Tax Year NOL Originated & Carrybacks & Carryovers \\ \hline Beginning before 2018 & \begin{tabular}{l} Back two years. ** Can offset 100% of taxable income before the \\ NOL deduction in carryback years. \end{tabular} & \begin{tabular}{l} Forward 20 years. Can offset 100% of taxable income before the \\ NOL deduction. \end{tabular} \\ \hline Beginning after 2017 and before 2021 & \begin{tabular}{l} Back five years.* Can offset up to 100% of taxable income \\ before the NOL deduction in carryback years. \end{tabular} & \begin{tabular}{l} Carried forward indefinitely. Can offset up to 100% of taxable \\ income before the NOL deduction in tax years beginning before \\ 2021 . In tax years beginning after 2020 , can offset up to 80 \\ percent of taxable income after deducting NOL carryovers from \\ NOLs originating in tax years beginning before 2018 . \end{tabular} \\ \hline Beginning after 2020 & Not allowed. & \begin{tabular}{l} Carried forward indefinitely. Can offset up to 80 percent of \\ taxable income remaining after deducting NOL carryovers from \\ NOLs originating in tax years beginning before 2018 . \end{tabular} \\ \hline \end{tabular} e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties. Note: Round "Annualization Factor" for Fourth quarter to 2 decimal places. XYZ is a calendar-year corporation that began business on January 1,2022 . For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6. 1. XYZ owns 30% of the outstanding Hobble Corporation ( HC ) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC 's earnings. 2. Of the $28,800 interest income, $7,200 was from a City of Seattle bond, $9,200 was from a Tacoma City bond, $8,200 was from a fully taxable corporate bond, and the remaining $4,200 was from a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as $1231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6. XYZ actually wrote off $32,500 of its accounts receivable as uncollectible. 7. Tax depreciation was $2,175,000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $500,000 of cash contributions to charities during the year 10. On July 1 of this year, XYZ acquired the assets of another business. In the process, it acquired $333,000 of goodwill. At the end of the year, XYZ wrote off $35,500 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences. 13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $440,000 ( $110,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2022 and that in 2022 it reported a tax liability of \$612,000. During 2023, XYZ determined its taxable income at the end of each of the first three quarters as follows: Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount. e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties. Note: Round "Annualization Factor" for Fourth quarter to 2 decimal places