AC 507 Unit 5 Assignment (Kaplan University)
a) Explain the net operating loss provisions of the tax code as they would relate to the Garvey Corporation.
b) Determine the tax liability for the Garvey Corporation for years 1 and 2 (using the tax rates given above).
c) Determine the income tax refund that Garvey Corporation would realize in year 3, assuming the corporation elected to use the carry back provision for its net operating loss.
d) Determine the required income tax payments for year 4.
e) Determine the income tax liability (refund) realized in year 5.
f) If the Garvey Corporation believes its business is about to “take off” and that future incomes will exceed all previous levels, resulting in higher tax rates, would you advise Garvey Corporation to forgo the carry back provision for its year 5 net operating loss? Why, or why not?