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29 December, 20:38

Iggies Ice Cream Company has taken a position in its tax return to claim a tax credit of $80 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. The tax credit would be a direct reduction in current taxes payable. Iggies believes the likelihood that a $80 million, $48 million, or $16 million tax benefit will be sustained is 25%, 35%, and 40%, respectively. Iggies' taxable income is $550 million for the year. Its effective tax rate is 40%. What is Iggies' income tax expense for the year

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  1. 29 December, 20:59
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    Total income tax expense = $172

    Explanation:

    solution

    we get here first tax Currently Payable that is

    tax Currently Payable = $550 million * 40%

    tax Currently Payable = $220 million

    and Tax credit available = $80 million

    so here Net Tax currently payable will be

    Net Tax currently payable = $220 - $80

    Net Tax currently payable = $140 million

    and

    Additional projected liability is = $80 - $48

    Additional projected liability is = $32 million

    so here Total income tax expense will be

    Total income tax expense = $140 million + $32

    Total income tax expense = $172
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