No net deferred tax asset (i.e., deferred tax asset net of related valuation allowance) was recognized in the 2005 financial statements by the Chaise Company when a loss from discontinued operations was carried forward for tax purposes because it was more likely than not that none of this deferred tax asset would be realized. Chaise had no temporary differences. The tax benefit of the loss carried forward reduced current taxes payable on 2006 continuing operations. The 2006 income statement would include the tax benefit from the loss brought forward in

  1. Income from continuing operations.
  2. Gain or loss from discontinued operations.
  3. Extraordinary gains.
  4. Cumulative effect of accounting changes.