Hoku Corporation (a C corporation) had the following history of income and loss: $\begin{array}{rr}\text { Year }&\text { Income (Loss) }\
2015 & \$ 40,000 \
2016 & \$ 70,000 \
2017 & (\$ 10,000)
\end{array}$ How much of a tax refund can Hoku Corporation receive by carrying back its 2017 loss?
A) $1,500
B) $2,500
C) $3,500
D) None; it cannot carry its loss back

Question

Quizplus · Accepted Answer

Hoku Corporation can carry back its 2017 loss of $10,000 to 2015, which had income of $40,000. This will reduce Hoku's 2015 taxable income to $30,000, resulting in a tax refund of $1,500 (35% x $10,000).

Hoku Corporation (A C Corporation) Had the Following History of Income