McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 24

Which of the following evidence would be considered negative in determining whether Gratiot Corporation needs to record a valuation allowance for some or all of its deferred tax assets?
a.The company forecasts future taxable income because of its backlog of orders
b.The company has a cumulative net loss over the current and prior two years
c.The company has unfavorable temporary differences that will create future taxable income when they reverse
d.The company had a net operating loss carryover expire in the current year
e.Both B and D constitute negative evidence in assessing the need for a valuation allowance