1. Administering Tax Reporting
  2. Working with Net Operating Losses (NOL)/Credits
  3. Learning NOL Automation Calculation Rules
  4. Utilizing Tax Loss/Credit
  5. Example Use Cases: Utilization
  6. Example Use Case 2

Example Use Case 2

This example shows a utilization rule with different percentages.

Taxable Income + Special Deduction = 28,000

Current year: 2021

Current period: P12

Current entity: LE105

Utilization Rules:

Table 28-6 Example Use Case 2: Utilization

Unrecognized Net Operating Losses     Unrecognized Capital Loss    
Year of Expiration TLCAvailable Utilization Automated Year of Expiration TLCAvailable Utilization Automated
2021 20,000 -15,000 2021 5,000 -5,000
2022 10,000   2022 10,000 -4,000
Total 30,000 -15,000   15,000 -9,000

In this example, per the configuration setup, only 50% of the total available amount for the TaxLossD0001 account will be utilized. The total is 30,000 and 50% =15,000.

Per the configuration setup, only 60% of total available amount for the Unrecognized Capital Loss account will be utilized. Total is 15,000 and 60% = 9,000

The maximum amount to utilize across all detail accounts is 24,000.

Therefore, 28000 – 24000 = 4000 is taxable amount remaining in the Current Provision.

  1. The system starts with the current year (2021) and attempts to utilize available losses in ascending Sequence order. Detail account Unrecognized Net Operating Losses is first in Sequence 1. The system utilizes 100% of the available loss for 2021 in Unrecognized Net Operating Losses. Available loss is 20,000. Amount utilized is 50% of 30,000, which is 15,000. 15,000 is less than 20,000, therefore, 15,000 will be utilized. The remaining taxable income is 28,000-15,000=13,000.
  2. Detail account Unrecognized Capital Loss is second in Sequence (2). The system utilizes 60% of the total available loss of 15,000, which is 9,000, for 2021 Year in Unrecognized Capital Loss. Available loss is 5,000. 5,000 is less than the maximum amount to utilize, therefore 5,000 is utilized. The remaining taxable income is 13,000-5,000=8,000.
  3. There are no more utilization rules for LE105. The system advances to the next year, 2022, and attempts to utilize all available losses until there are no more available losses, or there is no more taxable income to be offset.
  4. The Total utilized amount will be offset in the Current Provision for the Tax Loss Carryforward accounts.