Pennington Oil is in the 50% effective tax bracket. It had gross income of $470 million in each of the last 2 years. In the first year, deductions were $160 million. In the second year, deductions were lower at $120 million. The difference in income taxes paid by the company in the 2 years was closest to: (choose one)

(a) $10 million
(b) $20 million
(c) $50 million
(d ) $40 million


Tax difference = (160,000,000 – 120,000,000)(0.50) = $20,000,000

Answer is (b) $20 million

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