Kleckner Company started operations in 2010. Although it has grown steadily, the

Question

Kleckner Company started operations in 2010. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2014), Kleckner appears to have turned the corner and reported modest taxable income of $30,000. In addition to a deferred tax asset related to its net operating loss, Kleckner has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation.

Explanation / Answer

first we would say that we can consider net of DTA and DTL. So in absense of any other information we must consider 450000 eligbile for net DTA inthis case we can take the benefit of deferred tax asset in current year income of 2014. Whenever taxpayer chooses to carry back to net operating loss of past years this loss can be adjusted to taxable income in the first year itself of taxable income. so here we can take complete 30000 benefit and we can carry back remaining 420000=450000-30000 to the next years for adjustment

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