The Accounting Review Vol. 33 No. 1 1958
CALCULATION vs. AN UNDERSTANDING OF NET OPERATING LOSS.
Abstract
The article explains net operating loss with the help of examples. The article asserts that taxable income is determined annually on the basis of a year's operations. Section 172 of the Internal Revenue Code permits the taxpayer a degree of relief when loss years are intermingled with profit years, provided that any such loss year is due to a loss incurred in trade or business, is the result of a casualty loss, or is occasioned by a loss on the sale of real or depreciable property used in trade or business. The need for explaining how a tax return loss is converted into a net operating loss is felt. While it is relatively easy to explain to a student the various technical steps involved in calculating a net operating loss under the code, it is rather difficult to convince him of the logic involved. Though the instructor may emphasize initially that the purpose of the various adjustments required to convert an income tax loss into a net operating loss is to arrive at an economic or out-of-pocket loss, the student can quickly lose sight of the ultimate objective if he mechanically applies the provisions of the code to a given set of facts. Thus, the article tries to explain logically the calculation of net operating loss.
- DOI
- 10.2308/tar-7130713
- Volume
- 33
- Issue
- 1
- Pages
- 120-123
- Language
- en
- Sources
- openalex crossref