Loss Carryback and Carryforward

The Bookbinder Company has made $200,000 before taxes during each of the last 15 years, and it expects to make $200,000 a year before taxes in the future. However, in 2016 the firm incurred a loss of $575,000. The firm will claim a tax credit at the time it files its 2016 income tax return, and it will receive a check from the U.S. Treasury. Show how it calculates this credit, and then indicate the firm's tax liability for each of the next 5 years. Assume a 35% tax rate on all income to ease the calculations. Enter your answers as positive values. If an amount is zero, enter "0".

a)

Prior Years	2014	2015
Profit earned	$	$
Carry-back credit
Adjusted profit	$	$
Tax previously paid (35%)
Tax refund: Taxes previously paid	$	$

Total check from U.S. Treasury $

b)

Firm's tax liability 2017: $ 2018: $ 2019: $ 2020: $ 2021: $