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Tax Benefits From A Tax Loss: Whenever you operate a business, you take the risk of incurring a loss. If this happens to you, the tax benefits you reap from a tax loss depends upon whether your business is incorporated or non-incorporated. It also depends upon whether you take an active part in the business operations, or are simply an investor.
1) Incorporated. In general, if your business is incorporated (a C corporation), the tax loss belongs to the corporation, not the shareholders. Your shareholders would get a tax break only in the year that your business closes or in the year they sell their stock at a loss. You will use IRS Form 1120 to report your business activities to the IRS.
2) Unincorporated. If you operate an unincorporated business such as sole proprietors, limited liability companies, partnerships, and Subchapter S corporations do, you can take advantage of tax loss benefits easily.

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Re: What is tax relief from a tax loss?

A tax loss carryback is similar to the tax loss carryforward. The principle difference is that a year in which a loss is noted is not carried forward to a subsequent year. Instead, the tax loss carryback is applied to a previous year when you paid a lot in taxes, and allows you to reduce taxes already paid, which usually results in a refund of some of your taxes paid. Most often, though, people apply a tax loss carryback when a business underperforms or when individuals have a year in which investments or property lose significant value. In any of the three previous years, they may have paid much more in taxes due to profits from investments, or increase in values of things like their homes. For businesses that have had terrifically profitable years, an extremely bad business year might prompt an attempt to recoup some of the taxes paid in profitable years through a tax loss carryback.

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Posted : 24/04/2010 9:37 am