Question

In week 6, What are some of the things you have to do in regards to the provision for 20X7 taxes? When can you carry the non-capital losses? You have 2 options to use the losses. one is to carry the loss back 3 years or carry the whole loss forward 20 years? What are the implications for both? What is your recommendation?

A) A: Calculate and provision, B: 3 years; C: 20 years, D: Ignoring provisions
B) A: Ignoring provisions, B: Calculate and provision; C: 3 years, D: 20 years
C) A: 3 years, B: 20 years; C: Calculate and provision, D: Ignoring provisions
D) A: Calculate and provision, B: Ignoring provisions; C: 20 years, D: 3 years

Answer 1

The correct multiple-choice option that includes making a tax provision calculation and considering loss carryback and carryforward periods is A) Calculate and provision, B: 3 years; C: 20 years, D: Ignoring provisions.

Step-by-step explanation:

In week 6, for the provision for 20X7 taxes, the options include carrying the non-capital losses back or forward. You can carry the loss back 3 years which may allow for an immediate tax refund due to a reduction in taxable income from previous years. On the other hand, you could choose to carry the whole loss forward 20 years, which could provide a future tax shield if profits are expected to be higher.

Carrying the loss back is beneficial if you need an immediate cash flow, and if the taxable income in the previous years was high enough to generate a significant tax refund. Carrying the loss forward, however, would help if the company expects higher profits in the future, which would result in higher tax liabilities that could be offset by the carried forward losses.

To answer the multiple-choice question, option A) Calculate and provision, B: 3 years; C: 20 years, D: Ignoring provisions, is correct. It encompasses the requirement to make a tax provision calculation and details the options for loss carryback or carryforward periods.