Problem 2

You report pretax income of negative $100,000 and taxable income of negative $60,000 for 2017.

The difference between the two is due to the use of different revenue recognition practices.

Your past, current and expected future tax rate is 35%.

1. Prepare two disclosures that would be reported in the 2017 tax footnote in relation to deferred tax assets as of 12/31/2017. One assuming operating losses can be carried forward 20 years and that you did not carryback operating losses to get a refund of prior years taxes paid, and one assuming operating losses can be carried forward 20 years and that you did not carryback operating losses to get a refund of prior years taxes paid and that you do not anticipate being able to use any deferred tax assets in the future to offset future taxable income. What is the effective tax rate of the last disclosure?