Extraordinary Item

An extraordinary item is unusual and infrequent.

For example, an earthquake in Texas would be extraordinary. An earthquake in California would not be extraordinary because it’s not unusual. Dropping a bomb on a Kansas cornfield is extraordinary. Let’s say a farm is in a 35% tax bracket. Someone drops a bomb causing a $60,000 loss. The $60,000 loss would be an extraordinary item. Because the loss is a tax deduction, the net of tax loss would be $39,000. $60,000 loss + $21,000 tax refund ($60,000 x .35% = $21,000) = actual out of pocket loss of $39,000. The net of tax extraordinary loss of $39,000 would be listed separately towards the bottom of the income statement. If the company was paid $150,000 for their loss, it would end up being an extraordinary gain. $150,000 -$60,000 would be a gain of $90,000. If you had a $90,000 gain you would pay income tax of $31,500 ($90,000 x .35). The net of tax gain would $58,000 (90,000 gain – $31,500 tax bill).

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/extraordinary-item/