Carol Corp. has a component that is a discontinued operations. The component suffered a loss of $60,000. The component was sold for a gain of $200,000. The tax rate is 40%. What is the total income tax effect of the discontinued operations?

Income tax expense amounts to $56,000

Explanation:

The aggregate income tax effect of the discontinued operations is as:

Net gain = Gain from the sale - Loss suffered

where

gain from sale amounts to $200,000

Loss suffered amounts to $60,000

Putting the value above:

Net gain = $200,000 - $60,000

= $140,000

On the amount of net gain, the tax will be charged, which is as:

Tax amount = Net gain * Tax rate

= $140,000 * 40%

= $56,000

Therefore, the income tax expense would be $56,000