Garner Grocers began operations in 2010. Garner has reported the following levels of taxable income (EBT) over the past several years. The corporate tax rate was 34% each year. 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 2010. What is the amount of taxes the company paid in 2013? $$\begin{array} { lr }
Year&\text { Taxable Income }\
\hline
2010&- \$ 3,200,000 \
2011&\$ 200,000 \
2012&\$ 500,000 \
2013&\$ 2,800,000
\end{array}$$

Question

Garner Grocers began operations in 2010. Garner has reported the following levels of taxable income (EBT) over the past several years. The corporate tax rate was 34% each year. 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 2010. What is the amount of taxes the company paid in 2013? $$\begin{array} { lr } 
Year&\text { Taxable Income }\
\hline
2010&- \$ 3,200,000 \
2011&\$ 200,000 \
2012&\$ 500,000 \
2013&\$ 2,800,000
\end{array}$$

Quizplus · Accepted Answer

In 2010, Garner Grocers had a loss of $3,200,000. This loss can be carried forward to offset future taxable income. In 2011, the taxable income was $200,000, which can be offset by the loss, resulting in no tax liability. In 2012, the taxable income was $500,000, which can also be offset by the remaining loss, resulting in no tax liability. By 2013, the remaining loss is $2,500,000 ($3,200,000 - $200,000 - $500,000). The taxable income in 2013 is $2,800,000, so the taxable income after offsetting the remaining loss is $300,000 ($2,800,000 - $2,500,000). The tax on $300,000 at a 34% tax rate is $102,000.

Garner Grocers Began Operations in 2010 A) $ 92,055 B) $ 96,900 C) $102,000 D) $107,100

Garner Grocers Began Operations in 2010 A) $ 92,055
B) $ 96,900
C) $102,000
D) $107,100