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Sir one quick question.
In chapter 9: example 1, the taxable loss for y1 is $49000. In your lectures you directly calculated the tax savings instead of carrying it forward and claiming the loss against the future profits.
In contrast with TIPPLETINE (march/june 2018), the taxable loss for y1 is $14650000. Over here, instead of calculating the tax savings, the examiner has carried forward the loss of $14650000 and setted it off against the Y2 and Y3 profits.
When I apply the same approach to the example 1 question in OT notes on chapter 9, my answer contradicts with your answer. I am finding very difficult to comprehend this.
Please Advise.Thank you in advance for your explanation Sir! Have a good day!
There is no contradiction whatsoever.
In Paper FM we always assume that the company is already making profits and paying tax. Therefore any extra profit from the investment results in extra tax payable, and any loss from the investment results is less profit for the company and therefore a tax saving. I explain this in my Paper FM lectures.
We assume the same in Paper AFM except on two occasions. One is if the question specifically says different, and Tippletime specifically says that any tax losses on the investment can be assumed to be carried forward and written off against future profits from the investment.
The other is if the investment is in a different country from the company itself (as is often the case in Paper AFM), in which case the tax payable in the foreign country is calculated in that country and any losses can only be carried forward. I do explain this in my Paper AFM lectures.
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