KPMG report: Potential tax benefits under section 1341

Because tax rates changed after 2017, corporate taxpayers now may benefit from section 1341.

Because tax rates changed after 2017

Section 1341 is intended to mitigate the adverse effects resulting from the annual accounting concept for deductions allowed in lower tax-rate years upon a repayment of income received and recognized under a claim of right in a past higher tax-rate year.

Many corporate taxpayers may have overlooked section 1341 in the past because the top corporate rate of 35% remained in place for nearly 25 years, thus creating limited scenarios for such mitigation. Because tax rates changed after 2017, corporate taxpayers now may benefit from section 1341 in the form of rate relief, ability to use otherwise nondeductible capital losses, or an immediate refund for net operating loss positions.

A May 2022 report [PDF 256 KB] prepared by KPMG LLP discusses the potential benefits under section 1341: What’s News in Tax: Capturing a Permanent Tax Benefit from Previously Taxed Income


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