White Industries started their operations on January $1,$ Year $1$ and recorded $$400,000$ in warranty expense during the year. Warranty expense was the only difference between the company's pretax financial income and its tax return income of $$900,000.$ White will be required to pay these warranties at a rate of $$100,000$ per year beginning in Year $2.$ Although White fully expects to earn in excess of $$100,000$ in Year $2$ and Year $3,$ the company believes it is more likely than not that it will incur a loss after Year $3.$ The enacted tax rate is $25\%$ in current and future periods. What will White record as its income tax expense in Year $1?$

$$100,000$ $$125,000$ $$175,000$ $$225,000$

Note:

Please provide detail explanation on each step of calculation, along with details on the reasons behind creation of VALUATION Account.