Loss Carry-Back


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Loss Carry-Back (Carry-Forward)

A tax provision that allows operating losses to be used as a tax shield to reduce taxable income in prior and future years. Losses can be carried backward for up to three years and forward for up to 15 years under current tax codes.

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.
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Generally speaking, gross tax assets shall be admitted in an amount equal to the sum of (1) federal income taxes paid in prior years that can be recovered through loss carry-backs for existing temporary differences that reverse by the end of the subsequent calendar year; (2) the lesser of (a) the amount of gross deferred tax assets expected to be realized within one year of the balance sheet date, or (b) 10% of statutory capital and surplus as required to be shown on the statutory balance sheet of the entity for its most recently filed statement.
The end result was that Lynch Corporation recorded a $19,420,000 non-cash gain and an income tax benefit of $860,400 for 2002, resulting from a capital loss carry-back on its investment in Spinnaker.
The Bank's net income of $375,000 was primarily due to an incremental tax recovery of $1,220,000 after finalizing the 2009 tax return and recognizing the full effect of the five-year net operating loss carry-back rule for that year, but partially offset by provision for loan losses of $817,000.
Small business was not forgotten and North East businesses will welcome the decision to extend the three-year loss carry-back scheme - this is of real benefit to small businesses.
The bill offers a loss carry-back provision that would allow money-losing companies to claim tax credits on past profits dating back five years instead of two
Specifically, these provisions affected the tax liabilities of sole proprietorships, partnerships, and S corporations by the addition of a first-year depreciation deduction on qualified property, by the extension of the "general net operating loss carry-back deduction" from 2 years to 5 years, and by retroactive tax benefits for the area of New York City that was damaged by the terrorist attacks of September 11th, 2001.
The Senate bill also expands the ability of companies to apply 2003 losses to prior tax years by increasing the net operating loss carry-back period from two to five years.
The tax provisions in the measure include the exclusion of income from agricultural real estate and mortgage loans from taxable income and extend and extend the five-year net operating loss carry-back provision through 2011 for community banks with $15 billion or less in assets.
Net Operating Loss Carry-Back--Extend the five-year net operating loss carry-back for three years (2003 through 2005) and hold taxpayers harmless for AMT.
Over 110,000 Australian companies are closer to benefitting from new tax breaks after legislation for a loss carry-back initiative passed the House of Representatives last night, despite the Coalition refusing to support it.
As previously reported, this refund was possible due to the extension of the net operating loss carry-back period provided as part of the Worker, Homeownership and Business Assistance Act of 2009 signed into law on November 6, 2009.
The tax provisions in the measure include the exclusion of income from agricultural real estate and mortgage loans from taxable income and extend the five-year net operating loss carry-back provision through 2011 for community banks with $15 billion or less in assets.