Question

Can you give an example of a situation of “loss carry-back”?

Answer 1

Introduction:

A loss carry back gives the companies the benefit of off setting current period losses against previously paid taxes.

This provides the companies increased cash flow during economic degrowth.

Example:

In the present year the company had an operating loss of $200000. So the company can carry back this loss and off set against net operating income od $200000.

At this point the company can apply for a refund and get back the tax earlier paid on $200000.

For a company or individual, carryback period is limited to 3 years.

This is how the concept of loss carry back works.