What happens to a corporation's ability to carry over losses under IRS Form 1120?

A corporation's ability to carry over losses is an important aspect of how it manages its tax liabilities. Under IRS guidelines, specifically with regard to Form 1120, corporations can indeed carry over certain excess losses to future tax years. This means that if a corporation incurs a net operating loss (NOL) in a given year, it can typically utilize that loss to offset taxable income in future years.

The Tax Cuts and Jobs Act of 2017 significantly changed how NOLs can be used, allowing them to be carried forward indefinitely but limiting their utilization in future years to 80% of taxable income. Thus, while losses can be carried into future tax years, there are specific limitations on how much of those losses can be applied against future income.

This structure supports the correct choice regarding the nature of loss carryovers, highlighting how corporations can navigate their tax responsibilities effectively over multiple years. The option indicated reflects the proper understanding of how businesses can capitalize on losses to potentially decrease their future tax burdens.