Susies shaved Ice started operations in 2012. Although the company has grown steadily, the company reported accumulated operating losses of $500,000 over its first four years in business. In the most recent year (2020), Susies shaved Ice appears to have turned the corner and reported modest taxable income of $45,000. In addition to a deferred tax asset related to its net operating losses, Susies shaved Ice has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation. Given its past operating results, Susies shaved Ice has established a full (i.e., 100%) valuation allowance for its deferred tax assets. However, given its improved performance recently, Susies shaved Ice controller, Margret, wonders whether the company can now reduce or eliminate the valuation allowance. She is not clear on the rules related to accounting for deferred tax asset valuation allowances and is asking you to conduct some research on the matter.

Based on current GAAP rules determine 

1) the importance of future taxable income as it relates to the valuation allowance for deferred tax assets, 

2) the sources of income that may be relied upon to remove the need for a valuation allowance, and 

3) the types of positive evidence that can be used to support a conclusion that a valuation allowance is not needed.