Happy Times Inc., a Florida corporation, runs a string of movie theaters in the state. Due to the pandemic and the rise of digital streaming, Happy Times is not so happy anymore. It has been running losses for the last several years. To date, it has reported an accumulated $20 million in net losses, and at a 21% federal rate, recorded a $4.2 million deferred tax asset. The net operating loss is not subject to any time limitation or expiration. At its latest management board meeting, the directors made the tough choice to close most of the company's theaters and to pivot its business plan to a new platform of its own digital streaming service. Nevertheless, the company's chief financial officer offered a grim view of the company's revenue projections for the next 5 years. In her view, Happy Times would be lucky to reverse the trend of losing money, and perhaps earn a small profit of $4 million after all the strategic changes. Even with these changes, it is not clear if the company can avoid bankruptcy. What would be a reasonable conclusion based on the facts above?

1. The company should continue to carry a tax benefit of the full allowable net operating loss and keep its deferred tax asset at $4.2 million because the books already recorded the net loss
2. The company should probably post a partial valuation allowance against the deferred tax asset because it is not expected to realize the full benefit of its net operating loss in the current market environment
3. The company should continue to carry a tax benefit of the full allowable net operating loss and keep its deferred tax asset at $4.2 million because its net operating loss is not limited and will never expire

 4.The company should probably post a full valuation allowance against the deferred tax asset so that its tax benefit for the net operating loss would be zero because although it may not use the benefit next year, it could use some of it in the next few years