Question

Clinton Corporation operates in an industry for which NOL carryback is not allowed, and had the following pretax income (loss) over its first three years of operations 2022 $ 1,200,000 2023 (900,000) 2024 1,500,000 For each year there were no deferred income taxes and the tax rate was 25%. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2023. What was Clinton's income tax expense in 2024?

Answer 1

Clinton Corporation's income tax expense in 2024 was $375,000.

Step-by-step explanation:

Clinton Corporation had the following pretax income (loss) over its first three years of operations: 2022 $1,200,000, 2023 ($900,000), and 2024 $1,500,000. The tax rate was 25% for each year. Since NOL carryback is not allowed in their industry, the income tax expense is calculated for each year independently. To determine the income tax expense for 2024, we need to multiply the pretax income for that year ($1,500,000) by the tax rate (25%).

Income tax expense in 2024 = $1,500,000 × 0.25 = $375,000.