Pretax Operating Loss Sky Company reports a pretax operating loss of $50,000 in Year 3 for both financial reporting and income tax purposes. Its reported pretax financial income and taxable income for the previous 2 years had been: Year 1: $20,000 and Year 2: $30,000. Calculate Sky's income tax benefit from operating loss carryforward for Year 3. The tax rate for all years is 21%. 16,500 X Feedback Check My Work O The tax code allows a corporation reporting an operating loss for income tax purposes in the current year to carry this loss back or carry it forward to offset previous or future taxable income. The corporation may first carry a reported operating loss back two years (in sequential order, starting with the earliest of the two years). This procedure is called an operating loss carryback. In this case, the corporation files amended income tax returns showing lower taxable income for those years and receives a refund of income taxes previously paid. If a corporation's taxable income for the past two years is not enough to offset the amount of the currently reported perating it then sequential carries forward the loss for up to as many as 20 years and offsets the loss against future taxable income, if there is any. This procedure is called an operating loss carryforward.
Pretax Operating Loss Sky Company reports a pretax operating loss of $50,000 in Year 3 for both financial reporting and income tax purposes. Its reported pretax financial income and taxable income for the previous 2 years had been: Year 1: $20,000 and Year 2: $30,000. Calculate Sky's income tax benefit from operating loss carryforward for Year 3. The tax rate for all years is 21%. 16,500 X Feedback Check My Work O The tax code allows a corporation reporting an operating loss for income tax purposes in the current year to carry this loss back or carry it forward to offset previous or future taxable income. The corporation may first carry a reported operating loss back two years (in sequential order, starting with the earliest of the two years). This procedure is called an operating loss carryback. In this case, the corporation files amended income tax returns showing lower taxable income for those years and receives a refund of income taxes previously paid. If a corporation's taxable income for the past two years is not enough to offset the amount of the currently reported perating it then sequential carries forward the loss for up to as many as 20 years and offsets the loss against future taxable income, if there is any. This procedure is called an operating loss carryforward.
Chapter1: Financial Statements And Business Decisions
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L3.
Transcribed Image Text:Pretax Operating Loss
Sky Company reports a pretax operating loss of $50,000 in Year 3 for both financial reporting and income tax purposes. Its reported pretax financial income and
taxable income for the previous 2 years had been: Year 1: $20,000 and Year 2: $30,000.
Calculate Sky's income tax benefit from operating loss carryforward for Year 3. The tax rate for all years is 21%.
16,500 X
$
Feedback
▼ Check My Work
The tax code allows a corporation reporting an operating loss for income tax purposes in the current year to carry this loss back or carry it forward to
offset previous or future taxable income. The corporation may first carry a reported operating loss back two years (in sequential order, starting with the
earliest of the two years). This procedure is called an operating loss carryback. In this case, the corporation files amended income tax returns showing
lower taxable income for those years and receives a refund of income taxes previously paid.
If a corporation's taxable income for the past two years is not enough to offset the amount of the currently reported operating loss, it then sequentially
carries forward the loss for up to as many as 20 years and offsets the loss against future taxable income, if there is any. This procedure is called an
operating loss carryforward.
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