Meroo Corp. reported a deferred income tax liability of $28,000 on its 31 December 20X7 SFP. The income tax liability relates entirely to the difference between the UCC and net book value of machinery. At 31 December 20X7 the UCC is $1,920,000 and NBV is $2,000,000. Between 20X5 and 20X7 (inclusive) Meroo Corp. reported total taxable income of $463,000 and paid taxes for 20X5, 20X6 and 20X7 totalling $166,680. In 20X8 Meroo Corp. reported an accounting loss before tax of $579,000. In 20X8 depreciation expense amounted to $500,000 whereas no CCA was claimed for tax purposes. The enacted tax rate in 20X8 is 35%.

Required:
1. How much is the tax loss in 20X8?
2. Can any of the tax loss be used as a carryback? How much refund will Meroo Corp. receive as a result of any tax loss carryback?
3. Is any of the tax loss available as a tax loss carryforward? If so, how much? What is the benefit of any tax loss carryforward amount?
4. Assume management believes it is probable that there will be future profits against which loss carryforwards may be used. Record income tax for 20X8 under this assumption.
5. Assume that management had not recorded the tax loss carryforward in 20X8 but there subsequently were profits in 20X9. How would this impact Meroo Corp.’s ability to benefit from the tax loss carryforward amount?
6. If in 20X8 management did not believe it was probable there would be future profits against which loss carryforwards could be used, would income tax expense (recovery) be higher or lower? Explain.
7. If in 20X8 management did not believe it was probable there would be future profits against which loss carryforwards could be used and ASPE rather than IFRS were used, would your entry be the same as in requirement 6 above? Why or why not?
8. What is Meroo Corp.’s responsibility for income tax disclosure directly on the face of the SCI?