Caesar Corporation reported income before taxes of $220,000 for the years 2016, 2017, and 2018. In 2019 they experienced a loss of $220,000. 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?

Question

Quizplus · Accepted Answer

The net operating loss carryback will reduce the taxable income in 2016 and 2017 by $110,000 each year ($220,000 x 50%). The tax savings from this carryback will be $77,000 ($110,000 x 35%).

Caesar Corporation Reported Income Before Taxes of $220,000 for the Years