carryforward

(redirected from Loss Carry-Forwards)

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 ?
Also, the company mentioned that it had about USD170.1m of (pre-tax) federal net operating loss carry-forwards (NOLs) at 31 December 2018, which could be utilised in some circumstances to offset its taxable income and reduce its federal income tax liability.
The nine month earnings results reflect the recognition of CDN 8.8 million in deferred income tax assets ("DTA") derived from the tax loss carry-forwards assumed pursuant to the amalgamation of PWC Capital Inc.
In addition, a normal tax burden is expected again for 2014, after Munich Re posted a very low effective tax rate in 2013 due to the recalculation of tax for prior years and the utilisation of loss carry-forwards. The quality of our core business allows us to formulate this ambitious result target , said von Bomhard.
The transaction is expected to close during the third quarter of 2013, and CoreLogic says it expects to realize cash tax benefits from certain acquired amortizable intellectual property, amortizable goodwill and net operating loss carry-forwards with an estimated present value of approximately $115 million.
The analysis of strong growth potential is partly based on the value of AIG's operating loss carry-forwards. The analysis projects the potential net present value of AIG's loss carry-forward to a conservative project of $11.5 billion, or $8.28 a share.
(NYSE: VG) said it has adopted a tax benefit preservation plan intended to preserve the long-term value of Vonage's $795 million in federal net operating loss carry-forwards, which represent a substantial asset to the company and its shareholders.
"Although a valuation adjustment is recognized on these deferred tax assets, no economic loss has occurred as the underlying net operating loss carry-forwards and other tax benefits remain available to reduce future taxes to the extent income is generated," the company said in a statement.
Some common carry-forward items that create deferred tax assets that are sometimes missed are: net operating loss carry-forwards; capital loss carry-forwards; and alternative minimum tax credits.
The Commission, however, is concerned that the measure may favour ailing companies in comparison to healthy companies, with regard to their loss carry-forwards. The Commission has doubts on the compatibility of the measures with the EU guidelines on rescue and restructuring aid.
Sweden's administrative court of appeal has ruled against the investment company Investment AB Kinnevik in a tax dispute relating to the size of the tax loss carry-forwards in the associated company SCD Invest AB.
There are three common uses for these vehicles: to reduce taxable income, to take advantage of capital loss carry-forwards, and by corporations.
Results in the current year reflect a full tax rate of 43.2%, while utilization of tax loss carry-forwards pared the 1999 rate of 19%.