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    smokedetector Posts: 368, Reputation: 56
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    Feb 8, 2009, 10:34 PM
    Carry-back carry-forward
    In the printed notes from my prof:

    A company was incorporated in '03 and has a tax rate of 40%. It had taxable income or loss through '08 as shown. Assuming '08 has been completed, calculate the tax credit the company will get back from the IRS for '06 and '07.

    YEAR
    03----40,000
    04----10,000
    05----(65,000)
    06----20,000
    07----40,000
    08----(20,000)

    The answers given are 2000 and 6000 respectively, but I don't understand how.

    I know the taxes for each year are:
    16k
    4k
    -26k
    8k
    16k
    -8k

    I tried to take the negative earnings and distribute them back two years and forward up to 20 like the notes say, but it doesn't work. I just don't understand the concept I guess. I have googled to no avail. Can anyone help me understand HOW to get the answer?

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