Calculating the Tax Effect of Operating Losses

You use Tax and Valuation Options to calculate tax effects, which appear in Calc Tax Refund (v1640.00). Without this option, you can manually enter a Net Operating Loss (NOL)-related tax refund in Additional Tax Refund (v1635.00)—see Net Operating Loss Calculations. Enter NOL-related inputs in the remainder of the dialog box.

  To automatically calculate tax effect of losses:

  1. Access Tax and Valuation Options.

    See About Tax and Valuation Options.

  2. Select Taxes.

  3. Select Calculate Tax Effects Automatically.

    With this option, the model automatically calculates tax refunds by carrying back and/or forward NOLs by the number of years specified in these input boxes. The inputs apply only with this option.

  4. In Years for Loss Carryback, enter a number of years to carry back NOLs.

    In the United States, the Internal Revenue Code currently dictates losses can be carried back 2 years. Default.

  5. In Years for Loss Carryforward, enter a number of years to carry forward NOLs.

    In the United States, the Internal Revenue Code currently dictates that losses can be carried forward 20 years. Default.

  6. In Initial Loss Balance, enter an initial loss balance for the NOL-related tax refund calculation.

  7. In Initial Gain Balance, enter an initial gain balance for the NOL-related tax refund calculation.

  8. In Initial Balance of Taxes Paid, enter an initial balance of taxes paid on the initial gain balance.

    Note:

    Strategic Finance assumes the Initial Loss Balance, Initial Gain Balance and Initial Balance of Taxes Paid entries occur in the period before the first Strategic Finance time period.

  9. Click OK.