Calculate the tax loss carried forward to 2021 by the ABC Company of Utopia (show workings) (ABC is located in the special Enterprise Zone since 2019)

The ABC Company have the following results 2019 EAIT:$300,000

2020 EAI : $450,000 (loss)

The 2020 EAI Is calculated after charging the following $105,000 of overheads

Entertaining $5,000

Private car lease $10,000

Gifts $5,000

Water charges $10,000

Electricity charges $30,000

Transportation $5,000

Salaries $38,000

Interest $2,000

The Plant and equipment Account reads as follows

2019

Jan 1 2019 Acquisitions $2,000,000

Dec 31 2019 Depreciation $200,000

Dec 31 2019 Balance c/f $1,800,000

2020

Jan 1 2020 Balance b/f $1,800,000

Dec 31 2020 Depreciation $180,000

Dec 31 2020 Balance c/f $1,620,000

In addition, a $1m piece of plant is leased (the lease was signed on Jan 1st 2020) over 5 years with an option to take ownership at the end of the lease. The annual lease payments are $250,000.

The Sister Company XYZ of Nepal recorded a tax loss of $110,000 in the year 2020

Utopias tax code provisions are:

- Corporation tax is levied at 20%

- Leases with an option to purchase are to be treated as Financing leases

- Capital Allowances for plant is 50% in the year of acquisitionand 25% in years 2 and 3 straight line on a pooled basis

- Group losses can be transferred to profitable group members on a relief basis

- Private Car leases are not tax deductible

- Entertaining and gifts are not tax deductible

- Losses can be carried back one year, and forward for three years

- Businesses located in the special Enterprise Zone receive the following benefits

- 50% relief from Corporation tax

- A double tax deduction for 10 years on Utility charges