7. Town, a calendar-year corporation incorporated in January year 1,

experienced a $600,000 net operating loss (NOL) in year 3 due to a

prolonged strike. Town never had a strike in the past that significantly

affected its income and does not expect such a strike in the future.

Additionally, there is no other negative evidence concerning future operating

income. For years 1-2, Town reported a taxable income in each year, and a

total of $450,000 for the two years. Assume that: (1) there is no difference

between pretax accounting income and taxable income for all years, (2) the

income tax rate is 40% for all years, (3) the NOL will be carried back to the

profit years 1-2 to the extent of $450,000, and $150,000 will be carried

forward to future periods. In its year 3 income statement, what amount

should Town report as the reduction of loss due to NOL carryback and

carryforward?

a. $240,000

b. $180,000

c. $270,000

d. $360,000