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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The Gillard Government's loss carry-back initiative allows businesses in a loss position to use their legitimate tax deductions to refund tax paid in previous years.
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 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.
The income tax benefit was attributable to a $17 million credit recorded as a result of recent tax law changes increasing the net operating loss carry-back period to 5 years, partially offset by $5 million of tax expense related primarily to earnings from the Company's Canadian operations.
However, the Company expects to receive a tax refund during the current fiscal year of approximately $16 million as a result of recent tax law changes increasing the net operating loss carry-back period from two to five years.
6 million income tax benefit which results from an estimate of taxable loss that is expected to be monetized through the utilization of a net operating loss carry-back claim.
For Americans who have waited for action on the housing crisis - only to see handouts and bailouts for corporations - it is particularly encouraging that despite heavy lobbying from corporate homebuilders, Congress rejected a $25 billion taxpayer handout in the form of a net operating loss carry-back provision.
Net income in the three months ended March 31, 2002 was primarily a result of an income tax benefit of $3,651,000 in the period, resulting from temporary changes in certain tax laws, including an increase in a net operating loss carry-back period from two to five years.
3 million benefit from the excess of actual income tax refunds over amounts recorded by the Company in 2001 due to Federal tax law changes relating to the period of net operating loss carry-back, (ii) an additional refund totaling $475,000 relating to revising the accounting for a reinsurance agreement, and (iii) reinstating previously written down deferred tax asset amounts.
This change of year-end will provide significant cash flow benefits by allowing the Company to take advantage of expanded tax net operating loss carry-back provisions allowed for in the Job Creation and Worker Assistance Act of 2002.
3 million benefit from the excess of actual income tax refunds over amounts recorded by the Company due to Federal tax law changes relating to the period of net operating loss carry-back and $1.
Gross deferred tax assets are admitted to an amount equal to the sum of 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, and the amount of gross deferred tax assets expected to be realized with one year of the balance sheet date, or 10% of statutory capital.