Felicia Rashad Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2006 through 2014 as follows.

Income (Loss) Tax Rate

2006 $ 39,000 30%

2007 40,000 30%

2008 17,000 35%

2009 68,000 50%

2010 (150,000) 40%

2011 90,000 40%

2012 130,000 40%

2013 105,000 40%

Assume the carryback provision is employed for net operating losses. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized.

Instructions

Which method should you implement for 2010 to reduce the maximum loss:

1) loss carryback

2) loss carryforward

3) Both loss carryback and carryforward

You need to show calculations for each of the methods for your decision.