- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 9. Analysis of Income Taxes
- Subject 2. Deferred Tax Assets and Liabilities
CFA Practice Question
A firm that has never been profitable would likely choose to carry forward an operating loss up to twenty years. True or False?
Correct Answer: True
A firm that has never been profitable should only carry the loss forward against taxable profits over the next 20 years. Such a firm has no taxable profits from prior years to provide a carryback.
User Contributed Comments 10
| User | Comment |
|---|---|
| stranger | in this situation the adjustment will be made in the future years |
| kalps | 20 year carry forward allowed under US tax rules |
| AdriGul | 20 years tax loss carry forward?? I though it was limited to 2 back and 5 forward. |
| Nightsurfer | I just looked online. Apparently, it is 20 years. |
| chamad | It really depends on the local tax law. |
| magicchip | 20 in the US |
| johntan1979 | Isn't that amazing? (Sarcastic tone) Take out all the leverage risk you want, make huge losses, let big GOV bail you out with taxpayers' money, and pay no taxes for 20 years. |
| Inaganti6 | @Johntan1979 Rob a store go to jail. Run a massive corporation into the ground, pay no price. When you do naughty things, better have the law on your side ;) |
| jfermin315 | sounds like Trump work |
| Ewan2015 | This has changed under new tax law is indefinite but if never profitable this should be false as it is unlikely that they have sufficient objective evidence of a future tax profit that would allow them to use the NOL therefore they should have a full VA. |