Clinton Corp. had the following pretax income (loss) over its first three years of operations: For each year there were no deferred income taxes and the tax rate was 40%. For its 2017 tax return, Clinton did not elect a net operating loss carryback. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2017. What was Clinton's income tax expense in 2018?

Question

Clinton Corp. had the following pretax income (loss) over its first three years of operations:  For each year there were no deferred income taxes and the tax rate was 40%. For its 2017 tax return, Clinton did not elect a net operating loss carryback. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2017. What was Clinton's income tax expense in 2018?

Quizplus · Accepted Answer

$1,500,000 × 40% = $600,000
The tax benefit from the carryforward was recognized in 2017 and reversed in 2018. 11ea937b_35c5_d764_a419_ab1d4aa7a0a5_TB2599_00