FAR 6.5 & 6.6 - Income Taxes Flashcards
Intrapersonal tax allocation includes:
Income from continuing ops
Discontinued ops
Accounting principle change
Pension funded status change
Unrealized g/l on AFS debt and hedges
Foreign translation adjustments
Instrument specific credit risk
Impact current taxes and never affect future financial or taxable income. Does not affect deferred taxes.
Permanent differences
Impact current and deferred taxes:
Temporary differences
How does one calculate the current liability for taxes?
Tax return X current tax rate = current liability
How does one calculate deferred tax liabilities or deferred tax asset?
Temporary difference X future tax rate = deferred liability or asset
How is the total tax expense calculated?
Current liability - deferred liability or + deferred asset = total tax expense
Examples of permanent differences:
Tax exempt interest (municipal & state)
Life insurance proceeds on key officers
Life insurance premiums when corp. is the beneficiary
Penalties, fines, bribes, kickbacks
No deductible portion of meal & entertainment expense
Dividends received deduction
Excess percentage depletion over cost depletion
The deduction for business interest expense is limited to:
The sum of business interest income + 30% of the adjusted taxable income
Financial statement income first and tax return income later would create a:
DTA or DTL?
DTL
Tax return income first and financial statement income later would create a:
DTA or DTL?
DTA
Financials statement expense first and tax return expense later would create a:
DTA or DTL?
DTA
Tax return expense first and financial statement expense later would create a:
DTA or DTL?
DTL
Examples of items that cause deferred tax assets are:
Prepaid rent, interest, or royalties
Bad debt expense
Estimated liability or warranty expense
Start-up expenses
Examples of items that cause deferred tax liabilities are:
Installment sales
% vs completion method of accounting
Equity method of accounting
Depreciation expense
Amortization of franchise
Prepaid expenses used for the cash basis of tax
If future tax accounting income > future financial accounting income creates a :
DTL or DTA
DTL
