Company ABC has the following income before taxes 2014 8000

Company ABC has the following income before taxes: 2014 $8000 2015 $5000 2016 $(1000) 2017 $(30,000) 2018 $15,000. Please JE to record carryback and forward for 2016,2017 and 2018. Assume in 2015 $5000 was spend on meals and entertainment, what is the effective tax rate

Solution

In 2015, the company can deduct 50% of the amount on entertainment.

Income before taxes - $5000

Less: Amount spent on meals $2500

Income before taxes - $2500

In 2016, the amount can be carry forward to the extent of $1000.

In 2017,the amount can be carry forward to the extent of $ 30000

In 2018, the amount that can be set - off/ carryback to the extent of $15000 as 15000 is the income before taxes.