VB Corporation incurred a tax loss of $86,000.Based on a tax rate of 45% what is the potential tax benefit?

Question

Quizplus · Accepted Answer

The potential tax benefit is the tax savings that can be derived from the tax loss. To determine the tax benefit, we multiply the tax loss by the tax rate. Therefore, potential tax benefit = $86,000 x 45% = $38,700. Option A is incorrect as it is equal to the tax loss, which is not the tax benefit. Option C is incorrect as the tax loss can be used to offset future taxable income, resulting in tax savings. Option D is incorrect as we can determine the potential tax benefit by using the tax rate and tax loss.

VB Corporation Incurred a Tax Loss of $86,000