Madison Company has taken a position in its tax return to claim a tax credit of $60 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. The tax credit would be a direct reduction in current taxes payable. Madison believes the likelihood that a $60 million, $36 million, or $12 million tax benefit will be sustained is 25%, 30%, and 45%, respectively. Madison's taxable income is $510 million for the year. Its effective tax rate is 40%. What is Madison's income tax expense for the year?

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Probability table: 11ea937b_35c6_73a9_a419_43f6d43b2bec_TB2599_00 11ea937b_35c6_9aba_a419_7bbe6973a094_TB2599_00 11ea937b_35c6_9abb_a419_d75281f6dd9f_TB2599_00 $36 million is the amount of tax benefit that would be recognized in the financial statements; it represents the largest amount of benefit that is more than 50% likely to be the end result. $510 × 40% = $204 - 60 = $144 tax currently payable. Add additional projected liability ($60 - $36) of $24. Total income tax expense = $168.

Madison Company Has Taken a Position in Its Tax Return