Carryback

(redirected from Loss Carrybacks)
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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 ?
The rule eliminating loss carrybacks applies to losses arising in 2018 and later years.
This $2,000 would then be eliminated by the administrative loss carryback. At the close of the estate on June 1, 1993, the unused $10,000 administrative loss would not transfer to the debtor.
170(b)(1)(A), an individual's annual itemized deduction for cash contributions to public charities cannot exceed 50 percent of the individual's contribution base (adjusted gross income, without any net operating loss carryback).
Observation: Normally, the tax law restricts net operating loss carrybacks generated by interest expense allocable to a corporate equity reduction transaction (CERT), in which one corporation acquires at least 50% of another's stock.
96 also became a source of controversy because of its complexity and stringent tax asset provisions permitting recognition of deferred tax benefits only to the extent loss carrybacks would result in a refund of taxes previously paid.
179 deduction, net operating loss carrybacks or carryforwards and the Sec.
Indeed, the language of the proposed regulations might even be interpreted as denying a current deduction for a payment of state income tax on the ground the payment is contingent because the taxpayer may ultimately receive a refund of all or part of one year's tax by reason of net operating loss carrybacks. Such an interpretation, however, would be inconsistent with the rule that cash method taxpayers may treat all payments of state income taxes, including withholding and estimated taxes, as payments in the year paid or withheld despite the fact that all or part of the amounts may be refunded or credited at a later date.
A corporation cannot include net operating losses (NOLs) or capital loss carrybacks or carryovers when computing its taxable income.
It's also important for the lawyer and CPA to address the collection issue, checking for statutes of limitations on refunds, credits, net operating loss carrybacks and so forth.
The situation was complex due in part to a number of credit and loss carrybacks that affected the computations.
(For background information, see Tax Clinic, "Hotel Chain Entitled to $22 Million in Specified Loss Carrybacks," TTA, January 2001, p.20.)
A district court in Maryland has ruled that Host Marriott Corporation is entitled to specified liability loss carrybacks for workers' compensation payments and Federal income tax deficiency interest, resulting in a $22 million tax reduction.