carryforward

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Carryforward

In accounting, a way for a company to reduce its tax liability by applying losses to future tax years in which the company makes a profit. That is, carryforward allows companies to apply losses to profits that have not yet occurred and thereby reduce the taxes they pay on those profits. Carryforward is limited to seven years. For example, suppose a company loses $500,000 in year one, then nets $1,000,000 in year five. The company may carry forward the losses and only be liable for taxes on $500,000 of its profit in year five.

Independent contractors who file Schedule C with the IRS are required to use carryforwards, which is useful since most independent contractors lose money in their first few years of business. Some publicly-traded companies opt not to use it, as appearing to reduce profits may scare off potential investors who do not realize that the profits upon which taxes are paid do not equal the company's actual profits.

carryforward

1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. Thus, a loss in one year would be carried forward to a future year and used to offset profits up to the amount of the carryforward. Carryforwards are especially useful to firms operating in cyclical industries such as transportation. Also called tax loss carryforward.
2. In taxation of individuals, net capital losses exceeding the annual limit of $3,000 that may be carried to succeeding years so as to offset capital gains or ordinary income. There is no limit on the amount of capital losses that may be used to offset capital gains in any one year, only on the amount of losses in excess of gains that may be used to offset income. Also called carryover.
References in periodicals archive ?
Unlike the net operating loss carry-forward and the capital loss carry-forward, the alternative minimum tax credit does not have to be multiplied by the effective tax rate.
Furthermore, in order to limit the potential that future transactions could have a similar effect on the Company's tax attributes, the Company amended its by-laws to provide the Board of Directors with the ability to void certain transactions in Company securities that may impair or limit the future utilization of its tax attributes, including its net operating loss carry-forwards.
Notwithstanding the consummation of the Rescission Transactions and the amendment of the by-laws, there can be no assurance that the Company has been, or will in the future be, successful in preventing an event which could materially impair or limit the Company's utilization of its net operating loss carry-forwards and other tax attributes.
At such time, the Company estimates that its shareholders' equity will be comparable to the $173 million as of December 31, 2001, that the Company will have a reasonable level of cash flow for reinvestment, and that the Company will have a tax loss carry-forward of over $180 million, $125 million of which is net operating losses which will not begin to expire until 2013.
At the end of 1999, revenues were $356 million per quarter, it had a loss carry-forward of $559 million and a cash balance of nearly 1 billion dollars.
In addition, Glamis acquired all of the regional and project data generated by Cambior during its seven year exploration focus in Mexico, including a staffed exploration office in Hermosillo, and various tax loss carry-forwards associated with these activities.
00 in tax loss carry-forwards are going to expire on March 31, 1998, unless some action is taken.
Nineteen-ninety-five results benefited from carry-forwards of state tax deductions from prior years.
The Budget Bill authorizes corporations with net business loss carry-forwards from taxable years beginning prior to January 1, 2009 to use the carry-forwards to further offset income of other group members.