Note: this is not about a real corporate issue, I'm more curious than anything about how corporate taxes work. I know this is "Personal Finance", but there doesn't seem to be a site specifically for corporate finance.
In a very general, high level sense. How does the following situation work? Let's use simple numbers and grossly simplify the tax issues for purposes of illustration.
Suppose you have a company that has $1000 in revenue in CY 2012. Further suppose the company has $900 in operating expenses (for simplicity, we will ignore all other tax benefits and deductions). That means they will be taxed on $100 of profit, which at the corporate rate of 25% would mean they would have $75 in after tax earnings in the bank.
Now, suppose that in CY 2013 that company had $825 in revenue but still had $900 in operating expenses. (again, ignoring all other issues and accounting magic).
Now, they would have to cover that $75 loss with the money in the bank, which was after-taxed dollars, but is applied to their operating income, which should be tax deductible.
Is this not, in effect, taxing things that should be deductible?