Net operating loss. Occurs when a company’s allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period. The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that, because corporations are required to pay taxes when they earn money, they also deserve some form of tax relief when they lose money.

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