It is already May of Year 2 and Joe is worried that this year is not going to be a profitable year due to all the rain outs. Based on his estimates he believes they will have an operating loss of $1,200,000. Since Year 1 was good and the Corporation is having to pay taxes for Year 1 income, he would like to apply the operating loss back to Year 1.

Can Be You Sailing apply the operating loss of Year 2 back to Year 1 operating income tax return?

a.If the net operating loss was in 2017 he could carry the loss back and apply it to 2016 income, with an amended return.

b.If the net operating loss was in 2018 he could not carry the loss back to 2017 income, but he can carry it forward indefinitely.

c.Joe could use the loss against his individual ordinary income on his personal tax return (flow through business loss).

d.B and C are accurate options for Be You Sailing and shareholders

e.A and B are accurate options for Be You Sailing and shareholders

Joe would like to know more, so he has given you the following scenario for you to show him how operating loss rules work. What ifBe You has loss and income as reported below, how would the new limitation rules apply? Complete the following table to show Joe what would happen, using the 2018 net operating loss rules.

Year	Be You - Income (loss)	Max Allowable Deductible NOL	Taxable Income after Applying the carryover NOL	Is there any remaining 2018 NOL for the next year?
Year 2 (assume 2019)	(1,200,000) operating loss	Possible answers 27 30 a. $500,000 b. $400,000 c. $100,000 d. $2,000,000 e. $0 f. $1,200,000) g. 700,000 h. $1,600,0000 i. $800,000
Year 3	500,000 income	?	?
Year 4	2,000,000 income	?	?