CHPT 18 TAX _2_ CLASS outline 11 am

CHPT 18 TAX _2_ CLASS outline 11 am - OVERVIEW OF ACTG FOR...

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OVERVIEW OF ACTG FOR TAX LOSSES (2) I. HOW CAN A FIRM BENEFIT FROM A LOSS? II. LOSS CARRYBACK III. LOSS CARRYFORWARD: BENEFIT LIKELY TO BE REALIZED IV. LOSS CARRYFORWARD: BENEFIT UNLIKELY V. ASSESSING IF FUTURE BENEFIT IS LIKELY OR NOT VI. COMPARING CICA & FASB APPROACH
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I. HOW CAN A FIRM BENEFIT FROM A LOSS? - carryback (CB) loss to apply agst taxable income in a prior period & get a refund for tax paid in past - CB up to 3 yr - can apply operating loss agst operating taxable inc, apply c apital loss agst capital income - carryforward (CF) loss to reduce future taxable income, so we pay less tax in future operating loss CF 20 yr (7 yr for losses up to 2005) , capital loss indefinitely - CF operating loss 20 yr; capital loss indefinitely
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II. LOSS CARRYBACK IN ACTG FOR TAX LOSSES, FOLLOW STEPS IN ORDER : STEP 1 : RECORD TAX RECOVERABLE DUE TO LOSS CARRYBACK Maximum amt that firm can carryback (CB) is the lesser of: i) tax loss in current yr ii) taxable income in past 3 yrs (capital or operating, as applicable) To which year should CB be applied to first?
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