Answer:
$450,000
Explanation:
Theodore Enterprises had the following pretax income (loss) over its first three years of operations:
2016 $ 500,000
2017 (900,000 )
2018 1,500,000
For each year there were no deferred income taxes and the tax rate was 30%. In its 2017 tax return, Theodore elected a net operating loss carryback. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2017.
Therefore Theodore's income tax expense for 2018 is 30% x 1,500,000 = $450,000
Loss carry back is when a business elects to net off losses against a previous year's return as opposed to loss carry forward which is the future years' return.
Answer:
$450,000
Explanation:
during 2017, Theodore Enterprises reported a $900,000 loss = $300,000 net carryover, but since they decided to elect a loss carryback, those $300,000 went to reduce the payment of 2016 taxes (that were probably overdue).
That means that the company had no carryover left for 2018 taxes = $1,500,000 x 30% = $450,000
A carryover happens when a company chooses to carry a loss forward, while a carryback happens when the company chooses to reduced previous taxes with the current loss.
