Aug 13, 2020 - Economy

The magic of market timing

Alarm clock surrounded by money

Illustration: Annelise Capossela/Axios

Most companies want to maximize profits. This year, a lot of them are more interested in maximizing losses.

How it works: As part of the CARES stimulus bill that passed in March, companies' 2020 losses can be "carried backwards" — that is, they can be deducted from previous years' profits, including years when profits were taxed at 35%. (The corporate tax rate now is only 21%.)

  • For every $1 of 2020 losses, companies can claim back 35 cents from the taxes they paid in the past.

"Strategies include buying deductible equipment, accelerating bonuses, contributing to pension plans and exploring accounting-method changes," write Richard Rubin and Theo Francis in WSJ.

The bottom line: This is the best possible year for companies to lose money, by any means necessary. Expect a lot of very large contributions to corporate pension plans — even though the stock market is near record highs.

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