Problem 2

The Taffy Company Inc. (Taffy) has the following earnings history since being incorporated on January 1, 20x1.

Taxable Tax

Year Income (loss) Rate

20x1	($800,000)	30%
20x2	600,000	30%
20x3	1,200,000	31%
20x4	1,750,000	32%
20x5	(3,400,000)	34%
20x6	900,000	35%
20x7	(1,300,000)	38%
20x8	1,000,000	39%

The tax rates were in effect for the entire year and any changes only became known in the year of the change when they also became effective. Assume the condition of more likely than not has been satisfied and assume that the companys policy is to apply loss carry backs to the earliest year, i.e. a loss in year 4 would be first carried back to Year 1, then to Year 2 and then to Year 3.

Required

Calculate the current and deferred portion of income tax expense for all years.