Recognition of tax benefits in a loss year due to a loss carryforward requires

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The recognition of tax benefits in a loss year due to a loss carryforward requires the establishment of a deferred tax asset. This is because the loss carryforward will reduce the company's taxable income in future years, which will result in lower tax payments, creating a future tax benefit. This benefit is recognized as a deferred tax asset on the balance sheet.

Recognition of Tax Benefits in a Loss Year Due to a Loss