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Loss Carry-back, Carry-forward for Hermann Company

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3-9 Loss, Carry-back, Carry-forward

The Herrman Company has made $150,000 before taxes during each of the last 15 years, and it expects to make $150,000 a year before taxes in the future. However, in 2005 the firm incurred a loss of $650,000. The firm will claim tax a credit at the Treasury. Show how it calculates this credit, and then indicate the firm's tax liability for each of the next 5 years. Assume a 40 percent tax rate on all income to ease the calculations.

Answer:
Refund=$120,000
Future taxes = $0; $0; $40,000; $60,000; $60,000

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Solution Summary

Problem 3.9 requests a schedule for the carryback and carryforward of net operating losses for Hermann Company. The solution involves 8 different years to fully absorb the losses, and shows the calculations including refunds. The answers were given in the problem, but not the calculations.

Solution Preview

Attached Excel shows the calculations in a more readable format.

Hermann Company
Calculation of loss carrybacks
Form 1120
2,003 2,004 2,005 2,006 2,007 2,008 2,009 2,010

Taxable ...

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