Question

Luther Industries has outstanding tax loss carryforwards of $ 72 million from losses over the past four years. If Luther earns​ $15 million per year in pretax income from now​ on, in how many years will Luther first pay​ taxes?

Answer 1

Luther will have to pay some taxes after four years i.e five years from now

Step-by-step explanation:

Data provided in the question:

Outstanding tax loss carryforwards = $72 million

Number of years the tax loss carry-forwards will last

= ( Tax loss carry-forward ) ÷ ( Annual pretax income )

= ( 72 million ) ÷ ( 15 million per year )

= 4.8 years

Thus,

Luther will not pay taxes for the next four years

Hence,

Luther will have to pay some taxes after four years i.e five years from now.