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Real Estate Videos 105 videos

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Finance: What is Tax Loss Carry-Forward? 328 Views


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Description:

What is tax loss carry-forward? We promise it's a real thing, not just a bunch of words strung together.

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English Language

Transcript

00:00

finance a la shmoop what is a tax loss carry forward

00:06

all right well feel bad about losing money in your business last year

00:11

well this law will help make you feel a whole lot better you had been going [guy sinking in bath]

00:15

along swimmingly making ten million bucks a year in your hot tub pimp out

00:20

biz where you are the premier provider of turbo Jets neon lights spa caddies [fancy hot tub]

00:26

massaging floor inserts and literal wet bars but then Kanye launched a competing [alcoholic beverages]

00:32

business called hot and wet by Kanye and the next year well you lost six million [Hot and Wet by Kanye building]

00:37

bucks well on your 10 million of taxable profits in a year you had been paying 30

00:43

percent tax or 3 million bucks in taxes to show net income or earnings of 7

00:48

million dollars well you lost 6 million dollars last year so you paid no tax and

00:54

no the government doesn't rebate you 30% in taxes like they don't write you a

01:00

check for 30% of 6 million or 1.8 million years that you lose money

01:06

running your business but they do allow you to carry forward that loss into the

01:12

next year or the next or the next usually up to 7 years total in most

01:17

cases so that tax loss of 6 million bucks then comes in handy the following

01:22

year when Kanye's hot tubs are found to be administering second-degree burns to [Hot and Wet news paper]

01:27

its buyers and you once again make 10 million dollars in taxable profits only

01:32

this time you have 6 million dollars of tax loss carry forward that gets first

01:38

subtracted from the 10 million before you have to even think about taxes so in

01:43

this case you pay taxes on just 4 million dollars or 30% of 4 million or

01:48

just 1.2 million in taxes to net 2.8 million in net income essentially the

01:54

government splits your losses and lets you take the taxable part of losses into

02:00

the future so that the lows are not so low and well as far as Kanye is

02:04

concerned the highs are not so high [Kanye in court]

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