If a corporation cannot use its interest payments to get tax shield for a particular year because it has suffered a loss, it is still possible to get the tax shield because of the:
I. carry back provision that allows corporations to carry back the loss and receive a tax refund up to the amount of taxes paid in the previous two years.
II. carry forward provision that allows corporations to carry forward the loss and use it to shield income in subsequent years.
A) I only
B) II only
C) I and II
D) none of the above

Question

Quizplus · Accepted Answer

The carry back provision and the carry forward provision both allow corporations to still receive tax shields for interest payments even if they have suffered a loss in a particular year. The carry back provision allows corporations to receive a tax refund for the loss up to the amount of taxes paid in the previous two years, while the carry forward provision allows them to use the loss to shield income in subsequent years. Therefore, both options provide a way for corporations to still receive a tax shield for interest payments even if they have suffered a loss in a particular year.

If a Corporation Cannot Use Its Interest Payments to Get