Carryback

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Carryback

Carryback

In accounting, a way for a company to reduce its tax liability by applying a net operating loss to previous years in which it made a profit. If a company deducts more than its net income in a given tax year, it may take the difference between the deduction and the net income (a negative number) and apply it as a deduction on taxable income for the previous five years. For example, if a company makes $1,000,000 in one year, and loses $500,000 the following year, it may only be liable for a $500,000 profit on the year it makes a profit. That is, it may receive a tax refund on part of what it paid for the profitable year. See also: Future Income Tax.

carryback

A business operating loss that, for tax purposes, may be deducted for a certain number of prior years, usually no more than three. A business uses a carryback to recover taxes paid on income earned in prior years. For example, if a firm experiences a year of large losses following a period of profitable operations, it may use the losses to cancel out profits from preceding years on which taxes have been paid. When the taxes a company paid on profits are canceled because of a carryback, the firm is issued a refund by the Internal Revenue Service. Also called carryover, tax loss carryback.
References in periodicals archive ?
In lieu of a deemed realization rule, Congress has twice chosen an entirely different reform path; namely, the institution of a carryover tax basis regime.
It may make sense to use loss carryovers as soon as possible.
1986), in which the IRS was permitted to recompute taxable income in closed tax years to adjust NOL and charitable contribution carryovers to open years.
In addition, taxpayers may need to consider state restrictions on types of income to which loss carryovers may be applied.
Traubenberg added that, although the statute is clear that the section 199 manufacturing deduction cannot create or increase an operating loss, the effect of a loss carryover (or carryback) on the manufacturing deduction for a particular year is uncertain.
Therefore, firms with loss carryovers exercise their real options earlier because they have higher waiting costs, which in turn implies that the value of the real option from Equation (20) (i.
This order maximizes the use of the credits and credit carryovers, allowing the use of noncarryover credits first, and minimizes the loss of credit carryovers due to expiration.
But the entire $1 million purse, if Saturday's penchant for carryovers was any indication, could be up for grabs on the par-5, 536-yard 18th.
It's impossible to advertise such a carryover in time, so no-one would know about it.
Various elections are available which allow the taxpayer to plan the order in which the loss carryovers and basis are reduced and, in the case of reduction in basis, the properties affected.
Fiscal 2004 and 2005 revenues exceeded conservative estimates, allowing some reserve replenishment and balance carryovers.
Due to the most recent economic downturn, many corporate taxpayers accumulated significant carryovers of net operating losses (NOLs), alternative minimum tax (AMT) net operating losses (ATNOLs), and charitable deductions.