This question is from Schewer: Analysis of Income Taxes. At the end of the chapter Q# 9. where we need to find DTL at the end of year 2 when tax rate increase from 40% in year 1 to 50% in year 2. The solution says to multiply cumulative difference in income by new tax rate of 50%. i dont understand this. I will first calulate the DTL of year 1 with tax rate of 40 % and then calcualte DTL of second year with tax rate of 50% and then add them to find the cumulative DTL at the end of year 2 ?
always use future expected tax rate