A company can
carryback losses up to 3 years. This means that the company can use its 525,000
2015 loss to obtain a credit for income taxes paid in the previous 3 years,
2012-2014. The calculation is as follows:
2012 Carryback:
150,000 x .35 = 52,500
2013 Carryback:
150,000 x .35= 52,500
2014 Carryback:
150,000 x .35 = 52,500
The check that Book Binder
receives will be 52,500 x 3 = 157,500.
Its tax liability in
2015 will be zero, and its loss eligible for carryforward will be
525,000-450,000=75,000, since it has already carried back $450,000 of its loss
(2012-2014 income).
Its liabilities in
future years will be:
2016: (150,000-75,000)
x .35 = 26,250. We have now exhausted all tax credits possible from the 2015
loss.
2017-20: 150,000 x .35
= 52,500
