Brass Co. reported income before income tax expense of $60,000 for 2017. Brass had no permanent or temporary timing differences

Question

2 years ago

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Brass Co. reported income before income tax expense of $60,000 for 2017. Brass had no permanent or temporary timing differences

for tax purposes. Brass has an effective tax rate of 30% and a $40,000 net operating loss carry-forward from 2016. What is the maximum income tax benefit that Brass can realize from the loss carry-forward for 2017?

Business

1 answer:

Zielflug [23.3K] · Answer 1 · 2022-06-04T04:00:49+03:00

Answer:

$12,000

Explanation:

30%×$40,000= $12,000

Brass Co.'s 2017 taxable income of $60,000 exceeds the $40,000 net operating loss carry forward from 2016.

Therefore the total net operating loss carry forward can be utilized in 2017 in which $40,000 carryforward will be used to offset $40,000 of Brass' taxable income.