tax loss carryforward

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.
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tax loss carryforward

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
* A strong earnings history coupled with a prediction that the strong earnings will continue in the future, despite the loss that created the future deductible amount (tax loss carryforward or deductible temporary difference).
* A strong earnings history exclusive of the loss that created the future deductible amount (tax loss carryforward or deductible temporary difference) coupled with evidence indicating the loss (an unusual, infrequent or extraordinary item) is an aberration rather than a continuing condition.
Factoring out tax loss carryforward credits of $1.6 million and $1.05 million in the respective fiscal 1992 and 1991 periods, after-tax income was up 95.8%.
Purchasers of corporations whose tax loss carryforwards are likely to be limited by Sec.
Tax loss carryforwards will shield Altice USA's rising cash flow, so as the U.S.
CNO's ownership stake in TCP provides significant upside from expected growth at TCP and current non-life earnings to help utilize our tax loss carryforwards."
The Swedish fashion chain KappAhl AB said on Wednesday (29 November) that it has obtained tax loss carryforwards in connection with company acquisitions.
In a typical case, the "debtor" issuing the instruments would be a tax-indifferent party that would not be paying taxes currently, owing either to its status as a tax-exempt entity or, in the case of a commercial enterprise, to large tax loss carryforwards. In either case, the preferred share issuer would forgo interest deductions in exchange for a reduced "interest rate" paid in the form of a fixed return on preferred shares.
The valuation allowance covers certain state and federal net operating tax loss carryforwards that may expire before the Company is able to utilize it
After applying a $10.5 million, onetime tax benefit related to the recognition of certain tax loss carryforwards, Duane Reade netted $40.7 million in 1999.
Salton utilized operating tax loss carryforwards, which provided a benefit of 29.8 cents per $1 of before-tax income.