Saginaw Inc. completed its first year of operations with a pretax loss of $555,000. The tax return showed a net operating loss of $692,000, which the company will carry forward. The $137,000 book-tax difference results from 

excess tax depreciation over book depreciation. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Assuming the current tax expense is zero and tax rate is 34 percent.