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Corporation reported income before taxes of $200,000 for the years​ 2016, 2017, and 2018. In 2019...

Corporation reported income before taxes of $200,000 for the years​ 2016, 2017, and 2018. In 2019 they experienced a loss of $200,000. The company had a tax rate of 35​% in 2016 and​ 2017, and a rate of 45​% in 2018 and 2019. Assuming Caesar uses the carryback provisions for the net operating​ loss, by what amount will the income tax benefit reduce the net loss in​ 2019?

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Answer #1

Solution:

2019 loss carry back to 2017 = $200,000

Tax rate for 2017 = 35%

Amount by which income tax benefit reduce the net loss in​ 2019 = $200,000 * 35% = $70,000

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