=+LG 1 LG 3 P18–2 Tax effects of acquisition Turner and Fitting Company is evaluating the acquisition of Steel and Pipes Enterprises for $2.1 million. Steel and Pipes has a tax loss carryforward of $1.4 million. Some of the assets are deemed redundant and can be sold at their book value of $1.7 million. The following table shows the estimated earnings before taxes in the 5 years after the merger.

Year Earnings before taxes 1 $180,000 2 450,000 3 520,000 4 640,000 5 620,000