Net operating loss carrybacks


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Net operating loss carrybacks

The application of losses to offset earnings in previous years.

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.
References in periodicals archive ?
172, which allows a deduction for the tax year of "an amount equal to the aggregate of (1) the net operating loss carryovers to such year, plus (2) the net operating loss carrybacks to such year." The allowable carryback and carryforward periods for the tax years at issue are three years and 15 years, respectively, under Sec.
The Administration's budget proposal extends the temporary waiver of the AMTI limitation on net operating loss carrybacks to those originating in taxable years ending in 2003, 2004, and 2005, as well as for NOLs carried forward into those years.
179 deduction, net operating loss carrybacks or carryforwards and the Sec.
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.
For 1990 and 1991, C realized operating losses, which B deducted (through net operating loss carrybacks and carryovers).
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.
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