Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 37DQ
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What is the logic behind allowing tax loss carrybacks/carryforwards?
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Logic behind allowing tax loss carrybacks and carryforwards:
A tax loss carryback permits a company to put on a net operating loss to a tax return of preceding year. The carryback reduces a taxable income of previous year's in its place of the present or upcoming years. The tax loss carrybacks fallouts in a reduced tax bill for the year to which this "carried back" loss has been functional since it decreases the tax liabilities for that preceding year.
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