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 ?
2003-63, where the court did not allow the taxpayer to carry back a 1990 NOL to 1987 when he failed to file an election to waive the carryback period and instead carried the NOL forward and claimed a deduction for the NOL on his 1995 return).
For all three company types described above, monetizing the 2010 federal research (and other federal general business) credit via the five-year carryback could result in an ASC 740-10 (formerly FIN 48) liability, to the extent a reserve has been established for the underlying credits.
If V instead claims the $50x carryback refund for 2005 on Form 1120X, the IRS cannot make an assessment for 2005 under Sec.
For example, of the states that allow carrybacks, the following limit the amount that a taxpayer may carry back: Delaware ($30,000), Idaho ($100,000), New York ($10,000), Utah ($1 million) and West Virginia ($300,000).
2009-52 prescribes how and when to elect to carryback an applicable NOL.
The carryback and carryforward rules that apply to the general business credit are applied separately with respect to any unused LZBEC.
* Without repeal (or other action), the corporate AMT will greatly diminish the stimulative effect of other pending changes, including most notably those relating to the extension of the NOL carryback period and additional first-year depreciation.
This adjustment is a result of the carryback, and the tax effect should be included in the tax adjustment related to that carryback.
* Taxpayers with an NOL carryback refund claim may file Form 1045, Application for Tentative Refund, which generally is preferable to filing an amended return.
172(b)(1)(H)(iii) requires that the taxpayer elect a three-, four- or five-year carryback by the due date, unlading extensions, of the return for the tax year of the NOL.
Because the CNOL exceeded the aggregate PLEs of its member companies each tax year, the taxpayer treated the total PLEs as a consolidated PLL subject to the 10-year carryback. The IRS applied the separate member approach, thereby denying United Dominion the ability to use the PLEs incurred by members with positive separate taxable income toward the consolidated PLL subject to the 10-year carryback.
During the years at issue, the general carryback period was three years, but section 172(b)(1)(I) provided a ten-year carryback for PLLs.