Luther Industries has outstanding tax loss carryforwards of $70 million from losses over the past four years. If Luther earns $15 million per year in pretax income from now on, in how many years will Luther first pay taxes?

Question

Quizplus · Accepted Answer

Luther can offset its $15 million annual pretax income with the $70 million tax loss carryforwards. It will take 5 years to fully utilize the $70 million ($15 million x 5 years = $75 million), so Luther will first pay taxes in the 5th year.

Luther Industries Has Outstanding Tax Loss Carryforwards of $70 Million