Which of the following statements is correct?

I. Tax loss carrybacks result in deferred tax assets.
II. Tax loss carryforwards result in deferred tax assets.
III. The tax valuation account is used to adjust deferred tax liabilities if it is "more likely than not" that they will not result in increased future taxes.

A)I only
B)II only
C)III only
D)I and II

Question

Which of the following statements is correct?

I. Tax loss carrybacks result in deferred tax assets.
II. Tax loss carryforwards result in deferred tax assets.
III. The tax valuation account is used to adjust deferred tax liabilities if it is "more likely than not" that they will not result in increased future taxes.

A)I only
B)II only
C)III only
D)I and II

Quizplus · Accepted Answer

Tax loss carryforwards result in deferred tax assets, as companies can use these losses to offset future taxable income and reduce their tax liability. Tax loss carrybacks, on the other hand, result in a refund of taxes previously paid, rather than a deferred tax asset. The tax valuation account is used to adjust deferred tax assets (not liabilities) if it is "more likely than not" that they will not result in future taxable income.

Which of the Following Statements Is Correct