Madison Company has taken a position in its tax return to claim a tax credit of

Question

Madison Company has taken a position in its tax return to claim a tax credit of $160 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. Madison believes the likelihood that a $160 million, $96 million, or $32 million tax benefit will be sustained is 20%, 40%, and 40%, respectively. Madison's taxable income is $710 million for the year. Its effective tax rate is 40%. What is Madison's income tax expense for the year?

$124 million

$64 million

$284 million

$188 million

Madison Company has taken a position in its tax return to claim a tax credit of $160 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. Madison believes the likelihood that a $160 million, $96 million, or $32 million tax benefit will be sustained is 20%, 40%, and 40%, respectively. Madison's taxable income is $710 million for the year. Its effective tax rate is 40%. What is Madison's income tax expense for the year?

Explanation / Answer

Answer is $124 million.

Madison's taxable income 710 Tax liability @40% 284 Tax credit Claimed in return 160 Hence, Tax expense for the year 124

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.