Answered: loss carryovers or carrybacks). -,000)…

loss carryovers or carrybacks). -,000) ▪,000) 6,750 2,000 ,500) 0,000 1 taxable income after the NOL deduction (assume it elects to carryback any NOLs it is all fter the NOL deduction S

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 62P

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

MWC Corporation is currently in the sixth year of its existence (2021). In 2016-2020, it reported the following income and (losses)
(before net operating loss carryovers or carrybacks).
2016
2017
2018
2019
2020
2021
$ (69,000)
(19,000)
56,750
162,000
(220, 500)
340,000
a. What is MWC's 2021 taxable income after the NOL deduction (assume it elects to carryback any NOLs it is allowed to carryback)?
2021 taxable income after the NOL deduction
Year
2021
b. What is its 2021 book-tax difference associated with its NOL? Is it favorable or unfavorable? Is it permanent or temporary?
Book-tax
Difference
$ 220,500
Favorable or
Unfavorable
$
Favorable
Temporary or
Permanent
0
Temporary

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