Mays Industries was established in 2008. Since its inception, the company has generated the following levels of taxable income (EBT): $$\begin{array} { r r }
\text { Year } & \text { Taxable Income } \
\hline 2008 & \$ 50,000 \
2009 & \$ 40,000 \
2010 & \$ 30,000 \
2011 & \$ 20,000 \
2012 & - \$ 100,000 \
2013 & \$ 60,000
\end{array}$$ Assume that each year the company has faced a 40% income tax rate. Also, assume that the company has taken full advantage of the Tax Code's carry-back, carry-forward provisions, and assume that the current provisions were applicable in 2008. What is the company's tax liability for 2013?

Question

Mays Industries was established in 2008. Since its inception, the company has generated the following levels of taxable income (EBT): $$\begin{array} { r r } 
\text { Year } & \text { Taxable Income } \
\hline 2008 & \$ 50,000 \
2009 & \$ 40,000 \
2010 & \$ 30,000 \
2011 & \$ 20,000 \
2012 & - \$ 100,000 \
2013 & \$ 60,000
\end{array}$$ Assume that each year the company has faced a 40% income tax rate. Also, assume that the company has taken full advantage of the Tax Code's carry-back, carry-forward provisions, and assume that the current provisions were applicable in 2008. What is the company's tax liability for 2013?

Quizplus · Accepted Answer

The company's taxable income for 2013 is $60,000. The company has a $100,000 NOL carryforward from 2012. The NOL carryforward is used to offset the taxable income for 2013, resulting in a taxable income of $0. The company's tax liability for 2013 is therefore $0.

Mays Industries Was Established in 2008 Assume That Each Year the Company Has Faced a 40