Video: Introduction to Corporations: Net Operating Losses and Capital Loss Limitations

In this lesson, Nick Palazzolo, CPA, breaks down the intricacies of net operating losses (NOLs) and capital loss limitations for corporations. He offers insights into why these topics are specifically relevant to corporations, as the loss rules for S-Corporations and partnerships differ due to their flow-through nature to individual owners. Nick clearly articulates the mechanics of NOLs—operating losses that occur when a corporation's deductible expenses exceed its taxable income—and how they can offset taxable income in alternate years under U.S. tax law. He also explores corporate capital losses, covering the sale of capital assets, such as stocks or real estate, at a loss and the specific rules for offsetting gains, including the carryback and carry forward provisions. The lesson is designed to ensure a solid grasp of these rules, which are pivotal for navigating corporate tax returns and achieving success on the CPA exam.