In 2018,Collins Co.had taxable income of -$7,500,000.In 2019,the firm has taxable income of $10,000,000. Its corporate tax rate is 25%.Assume that the company takes full advantage of the Tax Code's carry-forward provision.What is Collins' tax liability for 2019?

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Collins Co. can carry forward its 2018 loss of $7,500,000 to offset its 2019 taxable income. Thus, its taxable income for 2019 becomes $10,000,000 - $7,500,000 = $2,500,000. With a tax rate of 25%, the tax liability is 25% of $2,500,000, which equals $625,000.