Problem 4-13 Net Operating Losses (LO 4.9) Tyler, a single taxpayer, generates business income of $3,000 in 2016. In 2017, he generates an NOL of $2,000. In 2018, he incurs another NOL of $5,000. In 2019, he generates a modest business income of $6,000 and then in 2020, the COVID-19 pandemic results in an NOL of $13,000. Assume that in all years, Tyler adopts the NOL treatment that results in the earliest and greatest refund. Provide a chronological analysis of Tyler's treatment of NOLs through 2020. In 2017, Tyler carries back his $2,000 NOL against his 2016 income leaving $ 1,000 of 2016 income. In 2018, Tyler carries forward the NOL to 2019 In 2019, Tyler can offset 80% of his 2019 income with the 2018 - NOL and he has a s X carryforward from 2018 1,000 of 2020 NOL In 2020, the COVID provisions allows him to carryback $ against the remaining 2019 income. The remaining s to 2016 v He can now use all of the remaining s 2018 loss against the 2019 income and then can use another $ NOL from 2020 may be carried forward indefinitely, to use against 80% of future taxable income. Feedback Check My Work The net operating loss provision is primarily designed to provide relief for trade or business losses. Generally, only losses from the operation of a trade or business, casualty and theft losses, or confiscation losses can generate a net operating loss. The rules related to NOLs have changed three times in recent years and with each change, NOLs are treated slightly differently. The three periods are: (1) the Pre-2018 period, (2) the 2018-2020 period (due to COVID-19 provisions), and (3) the post-2020 period. In the pre-2018 period, NOLs were eligible to be carried back two years and forward for 20 years. Any NOL carryforward or carryback could be used to offset 100 percent of the income generated in the carryback or forward period. NOLs generated in this period can continue to be utilized in the same manner