Carryback

(redirected from Loss Carryover)
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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 ?
If the property is considered "for rental only," the passive loss carryover will be freed up, i.
If the election is not made, and the bankruptcy estate has assets to administer, causing it to remain open through 2006, the debtor will not be able to use the capital loss carryover on the 2005 full-year return and a greater capital loss would be available to the bankruptcy estate.
Suspended 1994 Loss Carryover Income/(Loss) Participation Property A $2,000 $5,000 Material Property B $10,000 $8,000 Material Property C $20,000 ($7,000) Material Property D $0 ($3,000) Passive Property E $4,000 $6,000 Passive
Thus, if S1 discontinued its business within two years after the purchase of P's sock by B, the continuity of business requirement of section 382(c)(1) could be satisfied with respect to the entire consolidated loss carryover by either P or S2.
A loss carryover of a subsidiary may not be reattributed to the extent that the subsidiary and all higher-tier subsidiaries are insolvent (treating certain preferred stock as a liability) within the meaning of section 108(d)(3) at the time of the disposition (Prop.
The preservation of the subsidiaries' portion of the CNOL carryover would allow the group to offset future income with that loss carryover, at the cost of creating an ELA on that stock at that time.
1022(b)(2)(C)'s basis adjustments for net operating losses and capital loss carryovers raise the question of whether this relief provision includes (or should include) other loss carryover rules, such as those for passthrough entities and the at-risk and passive activity rules.
Under section 1062 of the House bill and section 872 of the Senate bill, the net operating loss carryover periods would be revised, decreasing the carryback period to 2 years while increasing the carryforward period to 20 years.
Many of these proposals -- which range from a denial of an interest deduction on certain debt instruments, to a reduction in the dividends-received deduction, to a modification of the loss carryover rules, to an increase in the penalties for failure to file information returns -- have not been subject to public scrutiny.
The 1992 results include a tax benefit of $322,000 from the value of tax loss carryover and $583,000 resulting from a change in accounting for income taxes.
Note that if neither the trust nor the beneficiary has a capital loss carryover, the lowest tax will normally be paid by having the trust pay the tax because of utilizing the lower brackets.