Hopper Corporation reported the following results for its first three years of operations: $$\begin{array} { l r }
2019 \text { income (before income taxes) } & \$ 40,000 \
2020 \text { loss (before income taxes) } & ( 360,000 ) \
2021 \text { income (before income taxes) } & 400,000
\end{array}$$ There were no permanent or reversible differences during these three years. Assume an income tax rate of 30% for 2019 and 2020, and 40% for 2021, and that any deferred tax asset recognized is more likely than not to be realized. If Hopper elects to use the carryback provisions, what income (loss) is reported for 2020?

Question

Hopper Corporation reported the following results for its first three years of operations: $$\begin{array} { l r } 
2019 \text { income (before income taxes) } & \$ 40,000 \
2020 \text { loss (before income taxes) } & ( 360,000 ) \
2021 \text { income (before income taxes) } & 400,000
\end{array}$$ There were no permanent or reversible differences during these three years. Assume an income tax rate of 30% for 2019 and 2020, and 40% for 2021, and that any deferred tax asset recognized is more likely than not to be realized. If Hopper elects to use the carryback provisions, what income (loss) is reported for 2020?

Quizplus · Accepted Answer

The 2020 loss can be carried back to offset the 2019 income, resulting in a tax refund. The remaining loss is carried forward to offset future income. The tax benefit from the carryback is $40,000 * 30% = $12,000. The remaining loss is $360,000 - $40,000 = $320,000. The reported loss for 2020 is $360,000 - $12,000 = $348,000.

Hopper Corporation Reported the Following Results for Its First Three